WASHINGTON (AP) -- Spending on U.S. construction projects fell in January by the largest amount in 18 months as home construction stalled and spending on government projects fell to the lowest level in more than six years.
The dip was viewed as a temporary setback with construction expected to keep moving higher this year.
Construction spending fell 2.1 percent in January compared with December, when spending had risen 1.1 percent. It was the biggest one-month decline since July 2011, the Commerce Department said Friday.
Residential construction, which has been leading the rebound in building, stalled in January with no gain in activity following a 1.7 percent rise in December.
Non-residential building dropped 5.1 percent while public construction was down 1 percent, pushing activity in the government sector to the lowest point since November 2006.
For all of last year, construction spending totaled $855.4 billion, an increase of 9.9 percent from 2011. It was the first annual gain after five straight years of decline. But construction was still well below healthy levels.
Construction activity in 2012 was 26.7 percent below the all-time high of $1.17 trillion set in 2007 at the peak of the housing boom.
The housing market began recovering last year after a deep, six-year slump. Steady hiring and nearly record-low mortgage rates have encouraged more Americans to buy homes. More people are also moving out on their own after living with friends and relatives in the recession. That's driving a big gain in apartment construction and also pushing up rents.
Sales of previously occupied homes ticked up in January after rising to their highest level in five years in 2012. And new home sales jumped 16 percent last month from December to the highest level since July 2008 while home prices rose by the most in more than six years in the 12 months ending in December.
Rising home prices encourage more people to buy before prices rise further.
Builders, meanwhile, started work on the most new homes in 4 1/2 years in December. Last year was the best year for residential construction since 2008, just after the recession started.