Homebuilders are sending a message: They won't be able to contribute much to the economic recovery now that government home buying incentives have vanished.

Home construction and applications for building permits sank in May, overshadowing favorable reports showing that inflation at the wholesale level remains tame and manufacturing output rose for the third straight month.

Construction fuels a broad swath of industries across the economy, and even with near- record-low mortgage rates, the builders are struggling.

Applications for building permits fell 5.9 percent to the lowest level in a year. Analysts had forecast an increase. Demand for permits is an indicator of future building activity.

The weaker-than-expected numbers come after a homebuyer tax credit expired in April. However, the Senate on Wednesday approved a plan to give homebuyers an extra three months — until Sept. 30 — to complete their purchases and qualify for the federal tax incentives of up to $8,000 for first-time buyers.

Output at the nation's factories, mines and utilities climbed 1.2 percent in May, the Federal Reserve said. Factory production rose 0.9 percent, and utility production jumped 4.8 percent. Mining was the only component that lagged.

Wholesale prices actually fell for a second straight month in May. But the 0.3 percent dip was pulled down by a 7 percent drop in gasoline prices. Core inflation, which excludes energy and food, rose 0.2 percent in May and is up just 1.3 percent over the past 12 months.

Meanwhile, FedEx Corp. released a disappointing profit forecast for its current fiscal year, raising more questions about the recovery. The package delivery company is seen as an economic barometer because shipping demand tends to increase as business conditions improve. FedEx did say pessimism about a recovery in global trade is too widespread, noting that strong international shipments drove its improved fourth-quarter results.

Source: The New York Times, David Streitfeld