WASHINGTON U.S. construction spending increased more than expected in May as a severe shortage of houses for sale boosted outlays on single-family homebuilding.

The Commerce Department said on Monday that construction spending rose 0.9% after gaining 0.4% in April.

Economists polled by Reuters had forecast construction spending increasing 0.6%. Construction spending advanced 2.4% on a year-on-year basis in May.

Spending on private construction projects jumped 1.1%, with investment in residential construction rebounding 2.2% after dropping 0.9% in the prior month. Private construction spending had risen 0.4% in April. Spending on single-family housing projects accelerated 1.7% in May.

Though the housing market has taken the biggest hit from the Federal Reserve's fastest monetary policy tightening cycle since the 1980s, an acute shortage of single-family homes available for sale is driving construction. Housing starts soared in May.

The construction spending report showed outlays on multi-family housing projects dipped 0.1% in May.

Spending on private non-residential structures like gas and oil well drilling fell 0.3%.

Spending on public construction projects edged up 0.1% after rising 0.5% in April. State and local government spending increased 0.4% while outlays on federal government projects dropped 2.5%.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)