Construction spending dropped 2.1 percent to an annual rate of $883.3 billion, the Commerce Department said on Friday. That was the largest percentage drop since July 2011 and snapped nine months of gains.
December's outlays were revised to a 1.1 percent increase rather than the previously reported 0.9 percent advance.
Economists polled by Reuters had expected construction spending to rise 0.4 percent in January.
Spending on private construction projects fell 2.6 percent, also the biggest drop since July 2011. Spending on private residential projects was flat after rising 1.7 percent in December as the housing market recovery gains momentum.
The housing market is no longer a drag on the economy and residential construction contributed to growth last year for the first time since 2005.
Spending on private nonresidential structures tumbled 5.1 percent, the largest fall in two years.
Public sector construction spending fell 1.0 percent, declining for a second straight month. Outlays on federal government projects dropped 1.3 percent, with state and local spending falling 1.0 percent