Construction spending falls in July in U.S.

Construction activity in the U.S. plunged in July by the biggest amount in six months as spending on homes fell for a record 17th straight month.

The Commerce Department reported Tuesday that construction spending dropped 0.4 percent in July, compared with June, the weakest showing since a 0.6 percent fall in January.

It was a bigger drop than economists had been expecting and underscored the continued drag the severe slump in housing is having on building activity.

Overall spending dropped to a seasonally adjusted annual rate of $1.169 trillion (EUR860 billion) after having posted a 0.1 percent increase in June.

Housing activity fell by 1.4 percent, more than double the 0.6 percent decline in June, and has now declined for a record 17 straight months as home building suffers through its worst slump in 16 years.

Economists believe the downturn will get even more severe in coming months, reflecting the spreading problems in the mortgage markets. Rising delinquencies, especially by borrowers of subprime mortgages, are dumping more homes on an already glutted market. That is forcing builders to slash construction plans even further and offer a variety of incentives to move the homes they have already built.

Some economists believe that the downturn in housing may not bottom out until the middle of next year.

The rising mortgage delinquencies have roiled global financial markets over the past few weeks as investors worry about which big investment house or hedge fund will be the next to declare huge losses in the market for securities backed by mortgage debt.