Fed's Beige Book Says Economic Growth Constrained By Supply Chain Issues, Labor Shortages

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With growth constrained by ongoing supply chain disruptions and labor shortages, the Federal Reserve's Beige Book said Wednesday that U.S. economic activity expanded at a modest pace in the final weeks of 2021.

The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, noted demand for materials, inputs and workers remained elevated among businesses.

While the report said consumer spending continued to grow at a steady pace ahead of the rapid spread of the Omicron variant of the coronavirus, the increase in new cases led to a sudden pullback in leisure travel, hotel occupancy and patronage at restaurants.

The Fed also said optimism remained generally high, although several districts cited reports from businesses that expectations for growth over the next several months cooled somewhat.

With regard to inflation, the Beige Book said contacts from most districts reported solid consumer price growth but noted price increases had decelerated a bit from the robust pace experienced in recent months.

Wholesale and materials prices contributed to pricing pressures across a wide range of industries, the Fed said, with many contacts attributed the high cost of inputs to ongoing supply chain disruptions.

While some districts reported that transportation bottlenecks had stabilized in recent weeks, procurement costs remained elevated.

The Fed noted ongoing labor shortages and associated wage growth also added cost pressures to businesses.

The report also said employment grew modestly in recent weeks, but contacts from most districts reported that demand for additional workers remains strong.

The Beige Book is typically released about two weeks before the Fed's next monetary policy meeting, which is scheduled for January 25-26.

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