WASHINGTON - The pace of home building rose slightly last month, but the number of permits builders sought for future construction plunged by the largest amount in 17 years, a sign that the nation's housing industry is still in a deep slump.

The Commerce Department said yesterday that construction of new homes and apartments rose to a seasonally adjusted annual rate of 1.528 million units in April, up 2.5 percent from the March level. By region, construction activity rose most in the Northeast.

Even with the improvement, housing construction is 25.9 percent lower than a year ago, reflecting the amount of the slide since a five-year boom in housing ended last year.

Moreover, the government report had a troubling sign for the future: Builders cut their requests for new construction permits 8.9 percent in April. That was the sharpest monthly drop since a 24 percent fall in February 1990, another period when housing was going through a significant downturn.

April's reduction left the annual rate for permits at 1.429 million units, the lowest in nearly 10 years.

While the April increase in actual construction was the third consecutive advance, analysts said the steep slide in permits was the far more telling figure, given that they are viewed as a much better indicator of where the industry is headed.

"The drop in permits . . . suggests the contraction in housing is not over and has some months to play out," said Bill Hampel, chief economist for the Credit Union National Association.

Sales of both new and existing homes set records for five straight years. But the boom ended dramatically in 2006, with many formerly red-hot sales areas suffering big declines in sales and prices.

The slump in housing has been a drag on the overall economy, pushing its annualized growth rate down to a lackluster 1.3 percent in the first three months of this year, the weakest performance in four years.

The 2.5 percent rise in construction starts in April reflected increases of 1.6 percent in single-family homes and 6.3 percent in multi-family units.

The regions of the country with the biggest increases were the Northeast, at 31.3 percent, and the West, at 7.8 percent. Construction activity was down 14.2 percent in the Midwest and 0.1 percent in the South.

In other economic news, the Federal Reserve reported that industrial output rose 0.7 percent in April, a stronger-than-expected showing that reflected a continued rebound in manufacturing and a big jump in output by the nation's utilities. Output had fallen 0.3 percent in March.

Manufacturing increased 0.5 percent in April, with production of autos, computers and electronic equipment showing big gains while output at utilities surged 3.5 percent, reflecting colder-than-normal weather.