Fed Beige Book Points to Ongoing Recovery and Tight Supply Chains

By at 3 June, 2021, 10:50 am



The survey information served up in the latest Federal Reserve Beige Book pointed to a slightly accelerating economy during the period from early April to late May, along with businesses continuing to wrestle with constrained inputs.

“Moderate” Growth

The Fed pointed to “moderate” growth, which was slightly faster than the previous period. Also noted were benefits from “increased vaccination rates and relaxed social distancing measures,” increased leisure travel and restaurant spending, and hiring increasing at a steady pace.

The Challenge: Supply Chains and Tight Labor Market

The challenges mostly had to do with shortages and supply chain constraints, such as in autos, manufacturing, construction, general factory production, materials and labor. In addition, pricing pressures continued to rise, with input costs growing more robustly than selling prices.

Regarding labor issues, it was reported, “It remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople. The lack of job candidates prevented some firms from increasing output and, less commonly, led some businesses to reduce their hours of operation. Overall, wage growth was moderate, and a growing number of firms offered signing bonuses and increased starting wages to attract and retain workers. Contacts expected that labor demand will remain strong, but supply constrained, in the months ahead.”

Positive Outlook, But Policy Threats Hover

Even with these immediate challenges, the outlook remained positive, “with contacts optimistic that economic growth will remain solid.”

Hopefully, as market participants react and adjust, output will increase and prices will settle.

Of course, the wildcard in the mix is policymaking, given that the Biden administration is pushing higher taxes, increased regulatory burdens and ramped up government spending that will work to undermine economic growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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