Fed's Beige Book: Inflationary pressures remained strong since the last report, with firms continuing to pass swiftly rising input costs through to customers

ECONOMIC ACTIVITY

• Economic activity expanded at a moderate pace since mid-February.


• Several Districts reported moderate employment gains despite hiring and retention challenges in the labor market.


• Consumer spending accelerated among retail and non-financial service firms, as COVID-19 cases tapered across the country.


• Manufacturing activity was solid overall across most Districts, but supply chain backlogs, labor market tightness, and elevated input costs continued to pose challenges on firms’ abilities to meet demand.


• Vehicle sales remained largely constrained by low inventories.


• Commercial real estate activity accelerated modestly as office occupancy and retail activity increased.


• Districts’ contacts reported continued strong demand for residential real estate but limited supply.


• Agricultural conditions were mixed across regions. Farmers were supported by surging crop prices, but drought conditions were a challenge in some Districts and increasing input costs were squeezing producer margins across the nation.


• Outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices.

LABOR MARKETS

• Employment increased at a moderate pace.


• Demand for workers continued to be strong across most Districts and industry sectors.


• But hiring was held back by the overall lack of available workers, though several Districts reported signs of modest improvement in worker availability.


• Many firms reported significant turnover as workers left for higher wages and more flexible job schedules.


• Persistent labor demand continued to fuel strong wage growth, particularly for footloose workers willing to change jobs.


• Firms reported that inflationary pressures were also contributing to higher wages, and that higher wages were doing little to alleviate widespread job vacancies.


• But some contacts reported early signs that the strong pace of wage growth had begun to slow.

PRICES

• Inflationary pressures remained strong since the last report, with firms continuing to pass swiftly rising input costs through to customers.


• Contacts across Districts, particularly those in manufacturing, noted steep increases in raw materials, transportation, and labor costs.


• In multiple Districts, contacts reported spikes in prices for energy, metals, and agricultural commodities following the Russian invasion of Ukraine, and several noted that COVID-19 lockdowns in China had worsened supply chain disruptions.


• A few reports noted that input suppliers were making use of more flexible contract terms or only honoring price quotes for 24 hours.


• Strong demand generally allowed firms to pass through input cost increases to customers, for example, via fuel surcharges for freight and airline fares.


• However, contacts in a few Districts noted negative sales impacts from rising prices.


• Firms in most Districts expected inflationary pressures to continue over the coming months.

Via The Fed

20 Apr 2022 - 19:00- Fixed IncomeData- Source: Fed