May 6 (Bloomberg) -- Canadian building permits rebounded 10 times as fast as expected in March, following five straight declines, led by more plans for office buildings and hospitals.

The total value of permits issued by municipalities surged 24 percent to C$4.5 billion ($3.8 billion), the biggest gain since March 2007, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg anticipated a 2.3 percent gain, the median of 14 estimates. The agency revised February’s drop to 15.8 percent from the originally reported 15.9 percent.

The value of permits remains below the level recorded in December, and has fallen 35 percent since peaking at C$7 billion in May 2007. A recession that began last year amid slumping demand for exports from the U.S. has spilled over into other industries such as construction as job losses mount and consumers cut spending.

“These data are certainly impressive when looked at in isolation,” Charmaine Buskas, an economist with TD Securities, said in a note to clients. “However, given the recent downward trend in overall building and the fact that levels of activity are still soft overall, one cannot hang too much optimism on these numbers.”

The Canadian currency gained 0.8 percent to C$1.1657 per U.S. dollar at 4:17 p.m. in Toronto, from C$1.1751 yesterday.

Today’s report is “good news, but we aren’t out of the woods yet,” Industry Minister Tony Clement told reporters in Ottawa today. “We have always said the Canadian economy is resilient, we’ve always said that we would bounce back quicker than most other economies.”

Spending Increased

Canadian business spending unexpectedly grew for the first time in six months in April, the Ivey purchasing managers’ index showed in a separate report today.

The index rose to 53.7 in April from 43.2 in March. Economists expected the index would decline to 40.8, based on the median of 16 estimates gathered by Bloomberg News. A reading of greater than 50 indicates that purchasing increased.

The Bank of Canada estimated last month that housing will cut 1.1 percentage points from growth this year as lower business profits and a deteriorating economy slow new projects. The central bank has cut its benchmark borrowing costs to a record 0.25 percent to spur growth.

The world’s eighth-largest economy will probably contract the most since at least 1961 in the first quarter because of rising joblessness and lower exports and household spending, Bank of Canada policy makers also predicted.

Non-Residential Construction

Permits for non-residential construction jumped 48 percent to C$2.3 billion, the agency said. The gain was led by an 89 percent surge in institutional buildings, mostly new hospitals in British Columbia and schools in Ontario, and a 46 percent gain in commercial structures, mainly office buildings in Ontario. Industrial permits fell 8.8 percent, Statistics Canada said.

Residential permits rose 5 percent to C$2.2 billion, as the value of permits for multiple-unit dwellings, including condominiums and apartments, advanced 7.3 percent to C$817 million and single-family home permits rose 3.7 percent to C$1.4 billion.

To contact the reporters on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.

Last Updated: May 6, 2009 16:38 EDT