Fed economic report: US economy is growing moderately

As of: 04/20/2022 9:35 p.m

The US economy has recently benefited from high demand and, according to the Fed, has grown moderately. However, inflation, the Ukraine war and supply problems are depressing the mood.

According to an economic report by the US Federal Reserve, the US economy has grown at a moderate pace since mid-February. According to the so-called “Beige Book”, which is based on business contacts from the individual regions, the economy will be supported by increased consumption in retail and services.

The services are therefore benefiting from the weakening corona pandemic. The Fed is thus assessing the situation somewhat more positively than recently. On March 2, she still spoke of moderate to moderate growth. However, rising prices and uncertainty created by recent geopolitical developments clouded the outlook, the central bank added.

Big challenges for companies

Overall, according to the “Beige Book”, the industry developed solidly in most districts. However, problems in the supply chains, bottlenecks on the labor market and increased production costs would ensure that companies would not be able to fully meet demand. Due to low inventories, for example, car sales are restricted.

The Fed also announced that inflationary pressures would remain high. Companies would pass on the rapidly rising costs to customers. Especially in the manufacturing sector, many companies have noticed a sharp increase in raw material, transport and labor costs.

After Russia’s attack on Ukraine, price peaks for energy, metals and agricultural raw materials were reached in several districts. In addition, the corona lockdowns in China would have made the problems in the supply chains even worse. Thanks to the strong demand, however, only a few companies have noticed a negative impact on sales.

Highest inflation since 1981

According to the Fed, most companies expect continued inflationary pressures. The annual inflation rate rose to 8.5 percent in March, the highest level in more than 40 years. For the first time since the beginning of the Corona crisis, the central bank had therefore raised its key interest rate at the meeting on March 16. Unusually large rate hikes of half a percentage point each are expected for the meetings in May and June.

The “Beige Book” is the US Federal Reserve’s economic report, in which the twelve regional central banks of the United States describe the mood of companies and thus paint an overall picture of future economic developments. The document is published eight times a year. The current collection of data was completed on April 11th.

source site