Thayer said that last year, when the economy was stronger, industrial companies pumped up their inventory levels. However, now those companies have enough inventory and are in the process of selling off what they have. That is especially true in the auto sector, Thayer noted.

"Automakers are a concern," he said. "Gas prices mean consumers are balking at buying gas-guzzling SUVs."

However, Richard D. Rippe, chief economist at Prudential Equity Group, said that gas prices had moderated recently, which could help the industrial sector regain some of its momentum and help the overall economy.

"Energy prices are the biggest short-term risk (for the industrial sector and the overall economy)," Rippe said.

High energy prices could prompt inflation, Rippe said, driving up costs for industrial producers while crimping consumer spending.

In contrast, a separate report by the Commerce Department said construction spending rose 0.5 percent to a record level in April, as office construction surged and activity in the housing market hit an all-time high.

The Commerce Department said the increase pushed building activity to a seasonally adjusted annual rate of $1.066 trillion in April, following gains of 0.6 percent in March and 1.2 percent in February.

The economic reports helped drive stock markets higher Wednesday, although a jump in oil prices cooled the rally.

The Dow Jones industrial average rose 82.39, or 0.8 percent, to 10,549.87, rising as much as 123.51 before giving up some of its gains as oil prices soared. They closed up $2.63 to $54.60 per barrel on the New York Mercantile Exchange on concerns that strong demand for diesel will leave it and other distillate fuels, including heating oil, in short supply later this year.

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E-mail: jnii@desnews.com