Highlights of the Fed’s anecdotal report on the economy:

Beige Book
  • Beige book from early April to late May
  • Several Districts cited the positive effects on the economy of increased vaccination rates and relaxed social distancing measures, while they also noted the adverse impacts of supply chain disruptions
  • Selling prices increased moderately, while input costs rose more briskly.
  • Contacts expected that labor demand will remain strong, but supply constrained, in the months ahead
  • Overall, wage growth was moderate, and a growing number of firms offered signing bonuses and increased starting wages to attract and retain workers
  • Overall, expectations changed little, with contacts optimistic that economic growth will remain solid.
  • Full report

Here is the full commentary on prices:

On balance, overall price pressures increased further since the last report. Selling prices increased moderately, while input costs rose more briskly. Input costs have continued to increase across the board, with many contacts noting sharp increases in construction and manufacturing raw materials prices. Increases were also noted in freight, packaging, and petrochemicals prices. Contacts reported that continuing supply chain disruptions intensified cost pressures. Strengthening demand, however, allowed some businesses, particularly manufacturers, builders, and transportation companies, to pass through much of the cost increases to their customers. Looking forward, contacts anticipate facing cost increases and charging higher prices in coming months.

That’s certainly inflationary.

It’s tough to read any of this though and believe that it changes Fed thinking. They expect a flood of workers to come back and that supply bottlenecks will eventually ease. There’s some pricing pressure now but they don’t believe it will be persistent. If we’re still seeing this kind of commentary in 5 months, that will be a different story.

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