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Fed’s Beige Book reveals modest economic activity despite continued supply constraints
The Federal Reserve released its latest Beige Book Wednesday which revealed that economic activity has expanded at a modest to moderate pace since the middle of January. However, many Federal Reserve Districts reported that surges in COVID-19 cases did temporarily result in business disruptions. Some Districts also noted a temporary weakening in demand in the hospitality sector.
Of note, winter weather was also cited as a cause of the disruption. All Districts indicated supply chain issues and low inventories continued to restrain growth, especially in the construction sector.
“The early part of the year experienced decent economic growth in spite of ongoing shortages in labor and supplies,” said NAFCU Chief Economist and Vice President of Research Curt Long.
According to the Beige Book, banking contacts showed signs of weakening financial conditions, although loan demand was generally unchanged.
“ The Federal Reserve’s business contacts reported disruptions from COVID and severe weather, which have since moderated,” added Long. “However, the war in Ukraine introduces substantial uncertainty and will likely exacerbate shortages in key commodities.”
Other notable insights from the latest Beige Book include:
- residential real estate demand was strong, with some Districts reporting no change in home sales due to seasonal trends and low inventories;
- reporting Districts indicated that the overall economic outlook over the next six months remained stable and generally optimistic;
- contacts reported they expect the tight labor market and consequent strong wage growth to continue, though a few Districts reported signs of wage growth moderating; and
- firms reported an increased ability to pass on prices to consumers, they expect additional price increases over the next several months.
The Beige Book report – a Fed publication on current economic conditions across the 12 districts – was based on information collected on or before February 18.