By Millie Munshi

March 26 (Bloomberg) -- Copper prices rose by the most in a week in New York on speculation that government spending in China, the world’s biggest metal user, will spur demand.

China, the world’s third-largest economy, is showing signs of recovery, and the “rapid decline in growth has been curbed,” People’s Bank of China Governor Zhou Xiaochuan said today. Copper has climbed 32 percent this year amid rising Chinese imports and falling global inventories.

“The stimulus plan in China seems to be working, and that’s going to be positive for demand,” said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida. “I’m pretty bullish on copper.”

Copper futures for May delivery climbed 5.2 cents, or 2.9 percent, to $1.855 a pound on the Comex division of the New York Mercantile Exchange. The increase was the biggest for a most- active contract since March 19.

The metal also gained “following stronger-than-expected U.S. economic data,” Barclays Capital in London said in a report.

U.S. sales of new homes jumped 4.7 percent in February from January, and orders for durable goods gained 3.4 percent, government data showed yesterday. Economists projected both to fall.

“A lot of people had really low expectations for the economy,” Smith said. “There was all of this talk of things looking like a depression. The reality is that things aren’t that bad. This is starting to be reflected in copper.”

‘Economic Optimism’

Copper prices have “established a new, higher trading range,” Donald Selkin, the chief market strategist at National Securities Corp. in New York, said yesterday. “Copper is always sensitive to economic optimism, and so we’re seeing the price move higher.”

The metal “has also been helped by stronger equity markets,” Selkin said. “Copper is following all the things that are pointing to better prospects for the economy.”

U.S. equities rose today, extending the market’s biggest monthly gain since 1987.

On the London Metal Exchange, copper for delivery in three months rose $140, or 3.5 percent, to $4,105 a metric ton ($1.86 a pound) at 6:22 p.m.. The price reached a record $8,940 on July 2.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

Last Updated: March 26, 2009 14:29 EDT