There's a sharp divergence emerging in the U.S. economic recovery, with housing stumbling and the industrial sector booming.

Ground-breaking for new homes and applications for building permits both plunged last month, as a popular set of tax breaks designed to stimulate home buying expired. The pullback is a worrisome sign that the recovery could face setbacks as the props for demand implemented during the depths of the recession are removed.

Meanwhile, the U.S. industrial sector is providing an unexpected degree of support to growth. Industrial production—the output of factories, utilities and mines—rose 1.2% in May, compared with the month before, the Federal Reserve said on Wednesday, as global demand for a wide range of U.S. goods continued to grow.