Companies feel stronger inflation and pay higher wages, says the Fed’s beige book

U.S. companies are experiencing escalating inflation that is exacerbated by commodity shortages and is likely to be passed on to consumers in many areas, the Federal Reserve reported Wednesday.

In its periodic review of the “beige book” on the nation’s economic landscape, the central bank also reported that global growth had “slowed slightly to a moderate pace” amid growing public health concerns during the July period in August covering the report.

“The slowdown in economic activity was largely attributed to a decline in restaurants, travel and tourism in most districts, reflecting safety concerns due to the increase in the Delta variant and in some cases , of international travel restrictions “. dit.

Rising inflationary pressures are part of this scenario in which a shortage of workers with higher wages is being reached.

The report noted that inflation is “steady at a high rate,” with half of the 12 Fed districts reporting “strong” pressure, while the other half said it was “moderate.” . However, the details of the report show that the problem is growing.

“With widespread scarcity of resources, pressures on ticket prices continued to be widespread,” the report said.

The companies reported “a substantial escalation in the cost of metals and metal-based products, transportation services and goods and construction materials,” even as timber fell.

They also said supply-level price pressures are likely to find a way to store shelves.

“Even with very high prices, many companies reported that they had trouble getting key inputs,” the report said. “Some districts reported that it is easier for companies to pass on more cost increases through higher prices. Several districts indicated that companies anticipate significant increases in their selling prices in the coming months.”

The launch of Beige Book comes as the Fed is debating the withdrawal of some of the extreme policies it has provided since the pandemic began. Specifically, officials are considering reducing monthly bond purchases, probably before the end of the year.

Supporters of maintaining the current policy are primarily concerned with the state of employment. The unemployment rate has fallen to 5.2%, but payroll growth slowed considerably in August amid fears over the Covid delta variant.

The beige book said all districts reported employment growth, although it ranged from “mild to strong.” Business contacts cited “extensive labor shortages,” despite “strong” wage growth, especially among lower-income workers, the main area the Fed is targeting with a policy adjustment which he approved a year ago.

“Employers were reported to use more frequent raises, bonuses, training and flexible work mechanisms to attract and retain workers,” the report states.