U.S. construction spending rose to a record level in February as home building hit an all-time high despite a weakening in home sales, the U.S. government said Monday.

The U.S. Commerce Department said overall construction spending rose to a seasonally adjusted annual rate of US$1.185 trillion in February, a gain of 0.8% from the January level.

That was better than the 0.5% increase Wall Street had been expecting and demonstrated that construction should remain a source of strength for the economy in 2006 as private building of offices, factories and other projects takes up the slack from a cooling housing market.

Separately, U.S. manufacturing growth slowed somewhat in March amid renewed inflation pressures, but activity remained at a level that suggests strength in the factory sector and robust overall economic growth.

The Institute for Supply Management said today that its index of manufacturing activity for last month stood at 55.2, down from 56.7 in February. Despite the slide, readings above 50 indicate expansion.

“Manufacturing continues to experience a significant level of growth,” said Norbert Ore, director of the survey, in a release. He added that “prices are still a major concern, particularly in the energy and metals markets.”

An index of prices paid by manufacturers hit 66.5 in March, up from 62.5 in February and 65 in January.

Other report components were slightly weaker. Hiring grew more slowly, with the employment index falling to 52.5 from 55 last month. The new-orders index stood at 58.4, down from the prior month’s 61.9, while the production index moved upward slightly to 57.5 from 57.4 in February. The index for inventories moved from 49.6 in February to 48.7 in March.

Meanwhile, the National Association of Realtors said its index for pending sales of existing homes fell a monthly 0.8% in February to 117.7, down 5.2% from a year earlier. A home sale is pending when the contract has been signed, but the transaction hasn’t closed. Pending sales typically close within a month or two of signing.