UPDATE 2-USG posts bigger loss, says market remains weak

* Net loss of 96 cents per share

* Sales drop 32 percent to $822 mln

* Shares fall 6 pct in morning trading (Adds industry background, analyst estimates, executive comment; Updates stock movement)

NEW YORK, Oct 21 (Reuters) - Building products maker USG Corp (USG.N) reported a larger quarterly loss on Wednesday and said the near-term outlook remains weak, sending its shares down 6 percent.

The result is another sign the housing construction industry has yet to fully right itself after collapsing during the recession.

Additionally, the U.S. Department of Commerce reported a smaller-than-expected increase in new-home construction on Tuesday.

In the short term, demand for products remains "challenging," though a focus on cost cuts has helped results, the company said.

"We remain confident that the company is well-positioned for an economic rebound and a recovery in residential, repair and remodel and commercial construction markets," Chief Executive William C. Foote said in a statement.

For the quarter, the company posted a net loss of $94 million, or 96 cents per share, compared with a loss of $36 million, or 36 cents per share, a year earlier.

Analysts expected a loss of 40 cents per share, according to Thomson Reuters I/B/E/S estimates.

Net sales fell 32 percent to $822 million, missing the $877 million analysts expected.

The Chicago-based company's shares fell $1.05, or 6.2 percent, to $15.78 in morning trading on the New York Stock Exchange. (Reporting by Matt Daily and Ernest Scheyder, editing by Gerald E. McCormick and Maureen Bavdek)