The U.S. grew modestly through the end of August, but the economic outlook for next year “remained weak overall” due to rising interest rates and lingering labor and supply shortages, according to a Federal Reserve study. .
The Fed’s regular survey, known as the Beige Book, says inflation “remains high”, although the price surge at the start of the year has started to wane. Inflation he hit a 41-year high of 9.1% in June.
Labor and material shortages, on the other hand, were less severe, but still caused problems for the economy.
“Overall labor market conditions remain tight,” the Beige Book said, adding that supply chain disruptions “continue to hamper production.”
The survey period is from July to the end of August.
Report highlights include:
The Federal Reserve Board (Fed) said the US economy was “on balance since early July.”
The housing market crashed as mortgage rates soared. Businesses showed less demand for office space. And car sales were “modest.”
On the bright side, consumer spending remained stable as Americans spent more on leisure and hospitality. Nor was it because of high inflation.
Still, the report shows companies to be more pessimistic.
The Beige Book said, “Prospects for future economic growth are generally weak, citing expectations that demand will weaken further over the next six to 12 months.”
Nine out of 12 Fed regions across the country report that “price increases have moderated to some extent.” Yet prices continue to rise.
Most business people “expected continued price pressure at least through the end of the year.”
The labor market remains tight, and wages are being pushed up as companies compete for workers.
“Many noted that offering bonuses, flexible working arrangements and comprehensive benefits were necessary to attract and retain workers.”
The Fed has found that “increased recession talk” is becoming more common.
Fed officials have said they are not trying to trigger a recession, but have acknowledged that the risk of a recession has increased as they try to keep high inflation in check.
Higher interest rates raise borrowing costs for consumers and businesses, slowing the economy.