Construction spending in August fell by the most in a year as a rebound in residential projects was offset by weak non-residential structures and public sector project outlays, a government report showed on Monday.

Construction spending fell 0.6 percent, the largest drop since July last year, to an annual rate of $837.1 billion, the Commerce Department said.

July's outlays were revised to a smaller 0.4 percent drop than the previously reported 0.9 percent fall.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

Economists polled by Reuters had expected construction spending to rise 0.5 percent in August.

Spending on residential projects rose 0.9 percent, a reflection of the improving housing market tone. The increase, which unwound July's 0.1 percent dip, was also driven by home renovations.

The housing market, one of the sluggish economy's few bright spots, is healing after collapsing in 2006.

But the rise in private residential construction spending was offset by a decline in outlays for non-residential structures, which fell to the lowest since December 2011. As a result, private construction spending fell 0.5 percent in August. It was the second straight month of declines in private construction spending.

Public sector construction spending fell 0.8 percent, declining for a second straight month. However, outlays on federal government projects rose 0.3 percent after two consecutive months of declines.

Spending on state and local government projects fell 0.9 percent after slipping 0.3 percent in July.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.