WASHINGTON, (Reuters) - - U.S. construction spending increased in October to a seven-month high amid gains in home building and public outlays, and estimates for the prior two months were revised sharply higher, pointing to strength in the sector.

The Commerce Department said on Thursday that construction spending increased 0.5 percent in October to $1.173 trillion,

the highest since March 2016. Construction spending in September was revised up to show it unchanged instead of declining 0.4 percent as previously reported.

Outlays for August were also revised higher to show a 0.5 percent gain rather than the previously reported 0.5 percent

drop. Construction spending was up 3.4 percent from a year ago in October.

October's increase was in line with economists expectations.

Spending on private construction projects slipped 0.2 percent in October as outlays on private nonresidential structures - which includes factories, hospitals and roads - tumbled 2.1 percent after falling 0.8 percent the prior month.

Spending on private residential construction, however, rose 1.6 percent after increasing 0.6 percent in September.

The government reported on Tuesday that spending on nonresidential structures contributed 0.26 percentage point to the third-quarter's 3.2 percent annualized growth rate.

Public construction spending jumped 2.8 percent in October, rising for a third straight month. Outlays on state and local government construction projects advanced 2.3 percent, also gaining for a third straight month.

Federal government construction spending surged 8.1 percent, reversing September's 1.6 percent drop.

(Reporting By Lucia Mutikani, Editing by Andrea Ricci)