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U.S. construction spending at five-year high

WASHINGTON, June 2 (Reuters) - U.S. construction spending rose to its highest level in five years in April, but the increase was less than expected, suggesting a mild pick-up after residential and nonresidential construction contracted in the first quarter.

Construction spending increased 0.2 percent to an annual rate of $953.5 billion, the Commerce Department said on Monday. That was the highest level since March 2009.

While the increase was less than economists' expectations for a 0.6 percent gain, March's construction spending was revised to show a 0.6 percent rise instead of the previously reported 0.2 percent advance.

Spending in April was led by public construction outlays, which rose 0.8 percent. Spending on both federal government and state and local government projects increased solidly.

But spending on private construction projects was flat as a 0.1 percent rise on residential outlays was offset by a 0.1 percent dip in nonresidential projects.

Still, private residential construction spending hit its highest level since March 2008. There were increases in both single and multi-family home building, a hopeful sign for housing, which is struggling to find momentum.

A run-up in mortgage rates has stymied the housing market recovery. Investment in home building and nonresidential structures such as factories and gas pipelines contracted in the first three months of this year for a second straight quarter.

The economy shrank at a 1.0 percent rate in the first quarter, largely reflecting a brutally cold winter and a slow pace of restocking by businesses.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)