In another report of slowing housing activity, the National Association of Realtors said its index for pending home sales fell for a third straight month in April, dropping 3.7 percent from the March level. This index tracks sales of previously owned homes where a contract has been signed, but the deal has not yet gone to closing.

Home sales have been hurt by rising mortgage rates, which climbed this week to a four-year high of 6.67 percent for 30-year mortgages, Freddie Mac reported.

Giving support to the belief that inflation pressures will stay contained was a Labor Department report that revised its estimate of first quarter productivity up to a solid 3.7 percent, better than an initial reading of 3.2 percent.

And unit labor costs, the amount employers must pay for each unit of production, rose at a moderate 1.6 percent rate in the first quarter, down from a worrisome initial reading of 2.5 percent.

While rising wages are good for workers, the Fed keeps a close tab on wage pressures for signs that inflation is getting out of control. Higher productivity means that workers can be paid more from their increased output without forcing employers to boost the price of their products.

For April, total construction spending fell to a seasonally adjusted annual rate of $1.195 trillion. The 1.1 percent drop in residential construction was offset somewhat by a 2.5 percent rise in nonresidential activity, reflecting solid gains in office, hotel and shopping center activity.