WASHINGTON - Fresh signs that the economy is stabilizing - though at very low levels - emerged yesterday in reports that home construction rose more than expected last month and wholesale prices remain in check.

Construction starts on new homes and apartments jumped 17.2 percent to a seasonally adjusted annual rate of 532,000 units from April's record low of 454,000 units, the Commerce Department said. Building permits, an indicator of future activity, rose 4 percent to an annual rate of 518,000 units.

But the gains were driven by a surge in the highly volatile category of multifamily buildings, which soared 61.7 percent in May after plunging 49.4 percent in April. Single-family home construction rose just 7.5 percent in May.

Meanwhile, the Producer Price Index, which measures wholesale prices, rose by a seasonally adjusted 0.2 percent from April, the Labor Department said. That was below analysts' expectations of a 0.6 percent rise.

Despite the increase, wholesale prices fell 5 percent in the last year, the largest annual drop in nearly 60 years.

Falling prices can raise fears about deflation, a destabilizing period of extended declines. But most analysts say efforts by the Federal Reserve to stimulate the economy will prevent deflation.

Yesterday's government reports, including a seventh straight drop in industrial production, follow a dip in homebuilder confidence reported Monday. Industrial production fell 1.1 percent in May as the recession crimped demand for many manufactured goods, such as cars, machinery and home appliances.

Taken together, along with a recent rise in mortgage rates, they depict an economy recovering very slowly from the longest recession since the Great Depression.

"The bottom line is that housing activity appears to have found a floor, albeit at a low level," Paul Dales, U.S. economist at Capital Economics in Toronto, wrote in a research note.

But any sustained rebound in home construction isn't expected until next spring. That's partly due to the glut of unsold homes and a record wave of mortgage foreclosures dumping more properties on the market.

The nation's largest banks also predicted yesterday that the overall economy would recover from its deep slump by late summer but remain weak until next year.

The American Bankers Association's Economic Advisory Committee said it expected the gross domestic product to increase 0.5 percent in the July-September quarter, after falling a projected 1.8 percent in the April-June period. The GDP, the broadest gauge of economic activity, measures the value of all goods and services produced within the United States. The GDP also fell in the fourth quarter of 2008 and the first quarter this year.