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Economic Growth Held Hostage By Inflation, Delta, Labor Shortage, Fed Says

EconomyOct 21, 2021 02:38
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© Reuters.

By Yasin Ebrahim

Investing.com – The trio of troubles including supply chain disruptions, labor market shortages and the impact of the Delta variant of Covid-19 has led to a slowdown in the economy, according to the Federal Reserve's Beige Book released Wednesday.

Economic activity grew at a modest to moderate rate, according to the majority of Federal Reserve Districts. Several Districts noted, however, that the pace of growth slowed this period, constrained by supply chain disruptions, labor shortages, and uncertainty around the pandemic, the Fed said in its Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through Oct. 8.

There was little sign that rising input costs were abating. "Most Districts reported significantly elevated prices, fueled by rising demand for goods and raw materials," the report said. Still, firms were able to offset the ramp-up in cost somewhat, by hiking selling prices.

"Many firms raised selling prices indicating a greater ability to pass along cost increases to customers amid strong demand. Expectations for future price growth varied with some expecting price to remain high or increase further while others expected prices to moderate over the next 12 months," according to report.

The dearth of labor, meanwhile, continued to hold back growth, with firms forced to raise wages. "Firms reported increasing starting wages to attract talent and increasing wages for existing workers to retain them."

While the outlook on the economy was mostly positive, the ongoing inflation and supply-chain disruptions had soured sentiment in some districts.

"Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months," according to the Beige Book,

Economic Growth Held Hostage By Inflation, Delta, Labor Shortage, Fed Says
 

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