WASHINGTON (Reuters) – The U.S. economy showed fresh signs of slower growth in the second quarter, with factory activity slipping in the mid-Atlantic region while groundbreaking declined at home construction sites. Other data on Thursday showed a spike in new claims for jobless benefits last week as well as soft underlying inflation that could point to weak demand in the economy. “We are seeing a soft start for growth in the second quarter,” said Sam Bullard, an economist at Wells Fargo in Charlotte, North Carolina. The data could raise concerns over the impact of a government austerity drive that began in January and the fallout from a recession in the euro zone. It could also increase pressure on the Federal Reserve to keep its money printing press running on overdrive to support the economy. The Philadelphia Federal Reserve Bank said its gauge of factory activity in the mid-Atlantic region fell to minus 5.2 in May. Negative readings in the index point to a contraction in activity. Drops in new orders and in employment weighed on the index, which covers factories in eastern Pennsylvania, southern New Jersey and Delaware. The report added to recent signs that weakness in manufacturing in March and April extended into May. “We are not rebounding from the recent swoon,” said Jacob Oubina, an economist at RBC Capital Markets in New York. “We are just muddling along.” U.S. economic growth picked up in the first three months of the year after a dismal fourth quarter, but the April-June period is expected to show a more lackluster expansion as Washington’s push to trim the budget deficit weighs on consumers and businesses. The federal government hiked taxes in January and initiated sweeping budget cuts in March. Signs of consumer weakness were evident in a report by Wal-Mart that sales fell 1.4 percent in the first quarter at its U.S. stores open at least a year. The data put downward pressure on U.S. stock prices, which were little changed at midday. It also pushed down yields on U.S. government debt, while the dollar weakened against a basket of currencies.