Spending on U.S. construction projects rose unexpectedly in December, led by gains in single-family home and office building, the government said.

Construction spending rose 0.6% in December to an annual rate of $811.5 billion after posting a 0.2% increase in November, the Commerce Department said.

The number was in sharp contrast with expectations from analysts who had estimated the department’s report would show a 0.4% drop in construction spending in December.

For all of 2000, construction spending rose 5.7% to $807.8 billion from $764.2 billion in the previous year. The gain last year was down from a 7.4% rise in 1999.

In December, construction on single-family homes rose 1.1% to $229.7 billion while spending on office building increased 1.9% to $58.3 billion. The gains more than offset drops in spending on industrial projects, hospitals and hotels.

Even with the U.S. economy rapidly losing steam, low interest rates have bolstered spending on construction.

The U.S. Federal Reserve cut short-term interest rates a half a percentage point, the second such move in less than a month. The decrease came after a flurry of hard data and anecdotal evidence showing the U.S. economy has slowed abruptly in recent months.

The Fed is expected to cut rates again in coming weeks to help rejuvenate the world’s largest economy.

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