Spending on U.S. construction projects fell in July for the second time in three months, as a drop in public projects overshadowed a surge in private home building.

The 0.2% drop, to $958 billion, followed a revised 0.1% gain the prior month, according to data released Tuesday by the Commerce Department. Spending by governments fell for the first time since January, while private housing projects rose 2.3%, the first gain in three months.

The housing recession is showing signs of bottoming out, with combined sales of new and existing homes in July reaching the highest level since late 2007. Also, government spending on infrastructure is forecast to start rising again as projects linked to the Obama administration's economic stimulus plan get under way.

"The drag on the economy from the residential market will likely dissipate in the coming quarters," said Jeffrey Roach, the chief economist at Horizon Investments. "Support for construction spending going forward will be from the public sector."

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