WASHINGTON— U.S. economic activity grew at a modest to moderate rate in recent months, with the pace of growth slowed due to supply chain disruptions, labor shortages and the effects from the Delta variant, according to the Federal Reserve’s latest Beige Book data.
“The Federal Reserve’s business contacts reported an optimistic outlook due to strong consumer demand,” commented NAFCU Chief Economist and Vice President of Research Curt Long. “Labor and raw material shortages continue to bedevil efforts to ramp up supply. Above-trend inflation looks like it will persist through the middle of 2022.”
According to the Beige Book, a majority of Federal Reserve Districts “indicated positive growth in consumer spending,” however auto sales continued to report a dip in sales due to low inventory and pricing surges.
Loan demand experienced flat to modest levels of growth, while residential real estate activity remained essentially unchanged and overall healthy, the Fed said.
Employment & Wages
In terms of employment and wages, employment showed a modest to moderate increase in the last few weeks. Worker demand was high, however, labor growth was stifled due to low worker supply. Firms reported high turnover rates with childcare issue, vaccine mandates, and COVID-related absences contributing to the turnover, Long said.
Of note, most Districts saw elevated prices triggered by the rising demand for goods and raw materials. According to the Beige Book, “Price pressures also arose from increased transportation and labor constraints as well as commodity shortages. Prices of steel, electronic components, and freight costs rose markedly this period.”
Other Key Data Points
Other notable insights, according to Long, from the latest Beige Book:
- The travel and tourism industry varied by district, some saw growth in leisure travel while others saw decline due to school returns and pandemic-related issues
- Transportation and tech firms saw low labor supply while retail, hospitality, and manufacturing firms cut hours and production due to low worker volume
- Quite a few firms offered training to expand the candidate pool, in some cases increasing automation to offset labor shortages
- Wage increases reported robust growth as firms attempted to attract and retain talent
- Future price growth expectations varied, some see prices continuing to stay high or increase, while others expect prices to moderate over the next year
The Beige Book report – a Fed publication on current economic conditions across the 12 districts – was based on information collected on or before Oct. 8.