The U.S. economy grew at a moderate pace in early spring as Covid-19 cases declined and high inflation rippled throughout the U.S. economy, and the Ukraine war created new economic uncertainty, the Federal Reserve said in a report.
“Outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices,” the Fed said on Wednesday in its periodic compilation of business anecdotes from around the country, known as the Beige Book. The report contained details about the latest effects of high inflation, supply-chain bottlenecks and the strong demand for workers.
The report, which included information gathered through April 11, said the tight labor market continued to fuel strong wage growth. Workers cited inflation as a reason for seeking higher wages. An employee in the food services sector told the Fed that the relatively low pay in their company was “a primary driver in recent unionization efforts.”
Businesses in the services sector reported strong demand. Tourism businesses in the Southeast said spring-break activity was booming this year, while companies on the West Coast said professional events and conventions were making a slow return.
“There’s a shift going on now of consumer spending moving back toward services and leisure,” said Charles Gascon, a senior economist at the Federal Reserve Bank of St. Louis. “The hospitality and services side of the economy seems to be much more optimistic than the goods side.”
The return to working in offices was mentioned by several businesses and workers in the report.
One major corporation in the St. Louis Fed’s district said it has encouraged workers to return by adding a coffee shop and an arcade-style area. A firm in the Minneapolis Fed’s district said that the return of working in person helped nearby businesses, while some employers in the Northeast said they have become more open to employees working from home.
Companies said that they also struggled with higher costs for freight, labor and materials, which were often passed down to consumers. A manufacturer in the Southwest said that some vendors have provided price quotes that last for less than 24 hours.
Airlines in the San Francisco Fed’s district said they expect airfares to become more expensive over the next few years because of the rising cost of fuel. The report noted that oil and gas prices rose sharply after Russia invaded Ukraine.
Companies also faced supply-chain bottlenecks, according to the report. One manufacturer in the mid-Atlantic said that some European suppliers shut down because of higher fuel costs. Other companies said they were concerned the Covid-19 surge in China could worsen supply-chain disruptions.
Write to Bryan Mena at [email protected]
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