Construction spending increased 1.3 percent in October, the first gain in three months, the government reported. But the advance was due in large part to new school and sewer proj-ects as spending on residential and non-residential buildings continued to fall.

The Commerce Department said overall residential, non-residential and government spending totaled a seasonally adjusted annual rate of $434.4 billion, up from $428.9 billion in September. Construction spending was unchanged in August at $441.2 billion.The 2.8 percent drop in spending in September was the steepest since a 3.0 percent decline in January 1982 in the midst of the 1981-82 recession. September's spending also was the lowest since $423.1 billion was spent in November 1988.

The October advance was the first since July when the increase was a barely perceptible 0.05 percent.

The construction industry has been slowing for months, wracked by high interest rates, tight lending requirements, high vacancy rates and plunging consumer confidence caused by the Persian Gulf crisis.

The weakness has been illustrated in recent Labor Department reports showing the loss of 185,000 construction jobs in the five months ending in October. October losses alone totaled 80,000.

Residential spending dropped 0.9 percent to an annual rate of $179.5 billion following a 2.5 percent loss the previous month.

Single-family spending fell 2.0 percent to $102.8 billion after a 3.1 percent drop in September. But apartment construction was up 1.0 percent to $18.7 billion.

Non-residential spending slipped 0.8 percent to $102.0 billion following a 1.5 percent decline in September.

Government spending, on the other hand, rose 7.7 percent to $117.8 billion after a 5.5 percent decline a month earlier. Spending on new schools was up 5.7 percent while spending for sewer projects advanced 15.5 percent.