Growth Slowed Amid Elevated Prices, Fed Beige Book Says

U.S. economic growth slowed to a modest to moderate rate this fall as firms confronted supply-chain disruptions, elevated prices, a shortage of available workers and fears around the Delta variant of Covid-19, the Federal Reserve said Wednesday.

Many businesses said they expected higher prices and supply shortages to last another year or so. The report, known as the Beige Book, collects anecdotes from businesses in Fed districts around the country.

“Outlooks for near-term economic activity remained positive, overall, but some districts noted increased uncertainty and more cautious optimism than in previous months,” the report said.

One bright spot in the report was the continued rise in consumer spending, which grew in most parts of the country. Manufacturing activity also increased and residential real estate spending was flat.

Car sales were down, however, because of a shortage of computer chips that has held down inventory and raised prices.

The report is in line with estimates that growth slowed in the third quarter. Economists surveyed by The Wall Street Journal earlier this month estimate the economy grew at a seasonally adjusted annual rate of 3.1% in the third quarter, down from 6.7% in the second.

The Commerce Department will release third-quarter data on Oct. 28.

Employers continued to struggle finding workers, the report said, with many offering bonuses, higher wages and more training. One retailer in the St. Louis area has started raffling off a car to employees with good attendance.

Other firms have had to automate more tasks or reduce hours due to a lack of available workers.

In the Atlanta area, most employers said they wanted to require Covid-19 vaccinations but were worried they would lose too many employees.

In the Philadelphia area, the end of enhanced unemployment benefits and the return to in-person schooling only produced, “at best,” a slight increase in job applicants. Many of those applicants were already considering another job offer.

“Childcare issues, early retirements and general burnout continued to depress the labor supply,” the report said.

Businesses also said backups along the supply chain had made it difficult to get the inputs they need. One apparel firm in the Boston region resorted to moving goods by air, which is more expensive than other modes.

Manufacturers in the St. Louis area said they were starting to consider producing goods domestically rather than relying on balky supply chains.

Other firms in the Philadelphia Fed district said the uncertain economic prospects and the lack of labor had kept them from investing in capital expansions that could alleviate some of the supply gridlock.

Shipping problems and higher wages have contributed to price increases. One Boston area furniture seller has raised prices more than 30% since February. And manufacturers there said they were seeing 10%-to-30% price increases for their inputs. Most said they raised their own prices as a result.

In the New York district “more retailers than at any time in recent years indicated that they have raised prices,” the report said. “A sizable proportion of contacts in most sectors plan to hike prices in the months ahead.”

Fed officials have said they expect inflation pressures to dissipate by next year. But they have suggested they would be willing to act to tighten monetary policy if they see signs of more persistent price increases.

With food markets on a wild ride lately, cheese has seen more volatility than most. Yet in supermarkets, prices have remained relatively stable. Here’s why sharp changes in wholesale cheese prices are slow to make it to consumers. Illustration: Jacob Reynolds

Write to David Harrison at

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the October 21, 2021, print edition as ‘Growth Slowed Amid High Prices, Fed Says.’