FED SURVEY: U.S. ECONOMY STRONG
But beige book report shows supply-chain bottlenecks had effect
The Federal Reserve’s latest nationwide business survey found that the economy strengthened further in late May and early June, despite supplychain bottlenecks that led to price hikes.
The Fed said Wednesday that seven of its 12 regional bank districts reported strong price increases with some businesses expressing concerns that the supply-chain disruptions would push prices even higher.
The U.S. economy is rebounding strongly from the recession brought on by the coronavirus pandemic. That has led to a surge in people seeking everything from new cars to hotel stays, leaving businesses struggling to find enough components and employees to meet the demand.
“While some contacts felt that pricing pressures were transitory, the majority expected further increases in input costs and selling prices in the coming months,“the Fed said in its latest beige book report, based on interviews with its business contacts around the country.
The report said that business sectors dealing with transportation, travel and tourism, and manufacturing all experienced above-average economic growth in the period.
But the survey also found that the supply-chain disruptions led to shortages of materials and labor, along with low inventories and constrained sales of many consumer goods.
“A report like this would have roiled markets several decades ago,” said Robert Brusca, an economist with FAO Economics. “There are lots of shortages and prices rising and input costs going up and labor in short supply.”
The Fed survey was based on interviews by the Fed’s 12 regional banks with business contacts in their regions. It will form the basis for discussions on the economy when central bank officials next meet on July 27-28.