Construction spending in the U.S. fell in December more than anticipated, capping the worst year on record for the industry.

The 1.2 percent decrease to $902.5 billion during the month matched the decline in November that was larger than previously estimated, Commerce Department figures revealed Monday in Washington. Homebuilding decreased 2.7 and commercial projects fell 0.5 percent.

The figures show the industry at the forefront of the deepest recession since the 1930s will be slow to rebound. Foreclosures that are projected to reach record levels this year may restrain homebuilding, while rising office vacancies will probably discourage new commercial projects.

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Construction spending dropped sharply in December to its lowest level in more than six years as new-home building fell by the steepest amount in seven months, evidence that housing remains a weak spot in the economy.

"Commercial construction is still grappling with sky-high vacancy rates and the unwinding of a building boom," Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. "Construction activity is likely to remain mixed as the economy moves further away from the recession.

Economists forecast spending would decline 0.5 percent in December following a previously estimated 0.6 percent drop the prior month, according to the median of 41 projections in a Bloomberg News survey. Estimates ranged from a drop of 2 percent to a gain of 1 percent.

Construction spending dropped 12 percent in 2009, the worst performance since records began in 1964.

Private residential construction spending decreased 2.8 percent in December from a month earlier, the biggest decline since May.

Non-residential construction, including public projects fell 0.5 percent from a month earlier, the report showed.

Privately funded non-residential construction climbed 0.2 percent in December from a month earlier as gains in the building of power and communications plants offset a drop in spending on new factories.

Public construction decreased 1.2 percent from a month earlier.

While housing may benefit this year from the expansion of an $8,000 tax credit for home buyers signed into law by President Barack Obama, foreclosures remain a hurdle.

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