WASHINGTON (Reuters) - U.S. construction spending picked up in July, lifted by gains in both private and public sector projects. The Commerce Department said on Wednesday that construction spending increased 0.3% after being unchanged June. Construction spending rose 9.0% on a year-on-year basis in July. Economists polled by Reuters had forecast construction spending gaining 0.2%. Spending on private construction projects rose 0.3% after increasing 0.4% in June. Outlays on residential projects advanced 0.5%, with single-family homebuilding spending increasing 0.9%, driven by robust demand for housing. Spending on residential projects increased 0.8% in June. The pace is, however, slowing because of expensive building materials as well as land and labor shortages. Investment in private non-residential construction like gas and oil well drilling slipped 0.2% in July. Spending on public construction projects rebounded 0.7% in July after dropping 1.6% in June. Outlays on state and local government construction projects rose, but federal government spending dropped 1.1%. Reporting by Lucia Mutikani; Editing by Andrea Ricci Our Standards: The Thomson Reuters Trust Principles.