The construction of new residences fell from June to July as overall construction spending contracted after six months of gains, the Commerce Department said Tuesday.

Construction on homes fell 1.6% from June to July, reaching $264.6 billion in the most recent government report. That compares to residential construction spending of $268.9 billion a month earlier.

Meanwhile, nonresidential construction spending fell a slight 0.9% from June to $294.1 billion in July.

Construction spending overall hit $834.4 billion for July, up 9.3% from a year earlier when spending in the same sector hit $763.5 billion, the Commerce Department said.

This positive year-over-year increase was offset by July construction spending falling a slight 0.9% from June's estimate of $842.2 billion.

The July monthly drop ended months of gains with construction spending in the first seven months of the year totaling $464.4 billion, up 9.3% from $425 billion a year earlier.

The Commerce Department's construction report offers doses of positive and negative news on a day when the Institute for Supply Management (ISM) showed economic confidence falling with fewer orders slowing August's manufacturing output.

The ISM index hit a score of 47.1, which is below the 50 level that generally signifies an expanding economy.

"New export orders are definitely part of the problem, at 47.0 for what is also the third straight month of contraction. Manufacturers, as they wait for new orders to return, are increasingly drawing down their backlogs which are at 42.5 for the fifth straight month of contraction," analysts with Econoday said.

The sub-50 manufacturing output level is indicative of general economic weakness—a factor that does not bode as well for housing or the overall economy in the coming months.

kpanchuk@housingwire.com