Copper rose the most in four weeks as U.S. government reports showing improved consumer spending and tame inflation eased concern that a slowdown in new-home construction will curb demand for metals.

Personal spending climbed the most since January and a gauge of prices posted the smallest gain of the year, the Commerce Department said today. The data suggest interest rates may remain steady, softening a slump in the housing market. Copper prices have more than doubled in the past year as demand surged from builders, the biggest users of the metal.

"The U.S. is still a huge consumer of copper," said Mark Lewon, vice president of operations at Utah Metal Works Inc., a scrap-metal recycler and broker in Salt Lake City. "We need people to keep spending on housing and durable goods to keep up copper demand."

Copper futures for December delivery rose 10.35 cents, or 3.1 percent, to $3.456 a pound on the Comex division of the New York Mercantile Exchange, the biggest gain since Aug. 4. Prices have fallen 14 percent since reaching a record $4.04 on May 11.

Copper for delivery in three months rose $250, or 3.4 percent, to $7,700 a metric ton at 7:39 p.m. on the London Metal Exchange.

The inflation data was "surprising," said Marc Kaplan, a scrap metal trader at Mews Metal Trading in Verona, New Jersey. Traders have been watching inflation and interest rates for hints at the pace of housing demand, he said.
Housing demand

"Housing prices have gone down dramatically and there are lots of houses for sale," Kaplan said. "Of course that's going to affect copper." Steady interest rates may slow the decline in housing, he said.

The housing market accounted for more than half of U.S. economic growth over the past three years, according to Merrill Lynch & Co. estimates. Growth in the second quarter slowed to almost half the pace of the prior quarter as home construction tumbled the most since 1995 and interest rates rose, the government said yesterday.

"Interest rate increases may have had a negative effect on the economy," said Darko Kuzmanovic, a Vancouver-based portfolio manager who oversees $35 million in natural resource and precious metal funds at David W. Tice & Associates. If rates remain steady, economic growth will slow at a lesser rate, he said.

The Federal Reserve voted to keep its benchmark lending rate unchanged at its Aug. 8 meeting, after raising it 17 consecutive times since June 2004.
Growth in manufacturing

Growth in manufacturing may help to offset slower demand from housing, Kuzmanovic said. Factory orders, excluding transportation equipment such as aircraft, gained 1.1 percent in July, the government reported today.

"A lot of the manufacturing and industrial indicators are still robust," Kuzmanovic said. "That can help maintain copper demand."

Continued growth in China, the world's largest consumer of the metal, will also fuel demand while supplies remain tight, said David Spika, vice president and investment strategist at Westwood Holdings Group in Dallas.

Copper for immediate delivery in Changjiang, Shanghai's biggest spot market, rose as much as 0.6 percent to 68,200 yuan a ton, making it 290 yuan more expensive than futures for September delivery and signaling demand is outstripping supply. Construction helped China's economy grow at a 10.2 percent rate last year, the fastest since 1995, Spika said.

"China has been a pretty big player and we see that continuing," he said. "The markets are pricing in what they think is going to be continued adequate demand and limited supply."
Voting at Escondida

Prices fell yesterday after BHP Billiton Ltd. and union officials reached a preliminary agreement that could end a 25- day strike at Chile's Escondida mine, the world's biggest source of the metal. Workers were voting today on the proposed contract. The walkout cut mine production by half.

Melbourne-based BHP, the world's biggest mining company, agreed to increase wages by 5 percentage points above inflation and pay a bonus of 9 million Chilean pesos ($16,705), company spokesman Mauro Valdes said yesterday from Santiago.

"The industry has been anticipating a relatively quick end to this Escondida strike for a while," said Dan Vaught, a commodity analyst at A.G. Edwards & Sons Inc. in St. Louis. "Most people who were willing to sell on that news did it yesterday."

Also on the LME, lead rose $27 to $1,242 a metric ton, nickel added $150 to $27,650 a ton, tin was $175 higher at $9,025 a ton, zinc advanced $30 to $3,370 a ton and aluminium gained $10 to $2,495 a ton.