That July results were better than the 0.4 percent decline some analysts were forecasting.

Stronger spending by government on big government projects in July helped to blunt widespread weakness in commercial construction by private builders. All told, spending by the government on public projects rose 0.9 percent in July, reflecting stronger spending on highways, schools, hospitals, and military facilities.

Spending on industrial complexes dropped by 4.3 percent. Spending on hotels and motels dipped by 0.8 percent. Spending on schools and hospitals also declined. However, spending on office buildings edged up by 0.3 percent.

For residential construction by private builders, activity dropped by 0.7 percent in July, with all the weakness coming from a drop in spending on new apartments, townhouses and other multifamily housing units. Spending on new single-family homes rose a solid 0.4 percent in July. Housing activity has remained solid due to low mortgage rates.

So far, eroding consumer confidence, the roller-coaster stock market and a stagnant job market haven't caused consumers to dramatically scale back spending. That's because those potentially negative factors have been offset by positive ones, including rising home values, low interest rates and a refinancing boom that has allowed homeowners to free up extra cash.