The United States rose slightly through the end of August, according to a Federal Reserve survey, but the economic outlook for next year “remains generally weak” due to rising interest rates and persistent labor and supply shortages.
The Fed’s regular survey, known as the Beige Book, said the sharp rise in prices at the start of the year had begun to fade, but inflation “remained elevated”. The inflation rate hit a nearly 41-year high of 9.1% in June .
Shortages of labor and supplies, meanwhile, were less acute but still posed problems for the economy.
“General labor market conditions remained tight,” the Beige Book said, while supply chain disruptions “continued to hamper production.”
The survey covers the period from July to the end of August.
Here are the highlights of the report:
The US economy was “broadly unchanged since early July,” the Fed said.
The housing market crashed as mortgage rates soared. Businesses showed less demand for office space. And auto sales were “muted”.
On the positive side, consumer spending remained flat, with Americans spending more on recreation and hospitality. Nor was it because of high inflation.
Yet the report indicates that companies are more pessimistic.
“The outlook for future economic growth remained generally weak, with contacts noting expectations of further easing in demand over the next six to 12 months,” the Beige Book said.
Nine of the Fed’s 12 regions across the United States reported “some degree of moderation in price increases.” Yet prices continue to rise.
Most trade contacts “expected price pressures to persist at least through the end of the year.”
The labor market is tighter than ever, the Fed found, and that’s driving up wages as companies compete for workers.
“Many noted that offering bonuses, flexible work hours and comprehensive benefits was seen as necessary to attract and retain workers.”
“More and more recession talk” has become more mainstream, the Fed found.
Fed officials say they are not trying to trigger a recession, but they acknowledge there is a growing risk of a recession as they try to rein in high inflation.
Higher interest rates slow the economy by increasing borrowing costs for consumers and businesses.