Spending on new construction projects rose in March, surprising economists, who had generally expected another month of declines. Increased government spending helped offset less money spent by the private sector.

While overall spending rose, the latest data suggested that the housing market could still be in a slump, as private spending on new home-building projects dropped more than 4 percent for the month.

The U.S. Commerce Department said Monday that the amount of spending on new construction projects rose 0.3 percent in March compared to the previous month, climbing to a seasonally-adjusted annual rate of $969.7 billion.

Economists had generally expected construction spending to fall by more than 1 percent.

March's result is 11.1 percent below the same period last year.

Private construction slipped 0.1 percent for the month, the Commerce Department said. The figure dipped to $661.0 billion.

Residential private construction, a key gauge of the health of the home building sector, dropped by 4.2 percent in March. This followed a 5.9 percent decline in February, suggesting that the slump in the housing sector continued.

A separate report about the housing sector mitigated the pessimism somewhat. An industry survey showed that pending home sales rose 3.2 percent in March, suggesting that sales of previously-owned homes could pick up in April and May.

This report, put out by the National Association of Realtors, deals with a slightly different issue than the residential numbers from the construction spending report, which provides statistics on new home construction.

However, a general pick up in the housing market would eventually lead to new activity for home builders, and economists are looking for any signs of a bottom in this key sector of the economy, which has been identified as the root of the financial problems the country has faced recently.

Spending on non-residential projects by the private sector was up 2.7 percent in the month.

The overall dip in private spending was more than offset by a rise in spending by the government. Monday's data showed that public construction spending was up 1.1 percent in March, rising to $308.7 billion.

Educational construction was up 1.6 percent, while highway construction was down by 0.8 percent.

Increased government spending has been a controversial topic in Washington.

Democrats, who pushed an economic stimulus package through Congress, argue that more government spending will help stimulate the economy. Republicans, however, generally believe that tax cuts would be a more efficient way to increase the amount of money in the economy, as this would provide more funds for private projects.

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