Demand for business services was robust, and retailers said sales continued to be strong. Overall manufacturing activity was still quite strong. Construction and real estate activity was mixed, with a rebound in home building but a softening in office leasing rates. Energy activity has been lackluster after showing signs of rebounding at the beginning of the year. Financial service contacts reported slower lending activity.
Drought continues to be a serious problem for agricultural producers.
Prices Price pressures were mixed with rising prices for energy products and some metals but continued price declines for some high-tech products and some construction inputs. The lowest crude oil inventories in over 20 years and OPEC's stated commitment to production cuts have pushed up oil prices since early January, despite generally lackluster demand. Despite higher heating oil and gasoline prices, rising crude prices are keeping refiners' margins under pressure, and refineries have sharply reduced output. Concerns that refiners are not building inventory for the spring and summer driving seasons pushed gasoline futures up to post-Persian Gulf war highs. Chemical producers say they would like to raise prices for basic petrochemicals, such as ethylene and polyethylene, to protect their margins from rising feedstock prices, and strong demand has pushed down inventories for ethylene, but excess capacity suggests producers will have difficulty raising prices.