WASHINGTON U.S. construction spending increased more than expected in October amid strong gains in single-family homebuilding, but data for the prior month was revised lower.

The Commerce Department said on Friday that construction spending rose 0.6%. Data for September was revised down to show construction spending climbing 0.2% instead of 0.4% as previously reported. Economists polled by Reuters had forecast construction spending climbing 0.4%.

Construction spending accelerated 10.7% on a year-on-year basis in October.

Spending on private construction projects increased 0.7% in October. Investment in residential construction shot up 1.2%.

Spending on new single-family construction projects surged 1.1%. Strong new single-family homebuilding helped to end nine straight quarters of decline in residential investment in the third quarter.

New construction is being driven by a dearth of previously owned homes on the market, but mortgage rates above 7% are a challenge for both builders and prospective home buyers.

Outlays on multi-family housing projects fell 0.2% in October. There is a large stock of multi-family housing under construction and the rental vacancy rate jumped to its highest level in 2-1/2 years in the third quarter, limiting growth in this housing segment.

Outlays on private non-residential structures like factories edged up 0.1%. Spending on manufacturing construction projects rose 0.9%, still supported by the Biden administration efforts to bring semiconductor manufacturing back to the United States.

Spending on public construction projects increased 0.2%. State and local government spending ticked up 0.1% while outlays on federal government projects increased 2.2%.

(Reporting by Lucia Mutikani)