Fed Downgrades U.S. Economy as Growth Slows in Beige Book Report

WASHINGTON, DC - MARCH 03: U.S. Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on the Fed's "Semiannual Monetary Policy Report to the Congress," on Capitol Hill on March 3, 2022 in Washington, DC. (Photo by Jonathan Ernst-Pool/Getty Images)
Jonathan Ernst-Pool/Getty Images

The economy in many parts of the U.S. has slowed in recent weeks, a report from the Federal Reserve showed Wednesday.

The majority of the Fed’s 12 districts reported “slight or modest” growth, the central bank said in its Beige Book. Four reported “moderate growth.”

That’s a downgrade from the prior report issued in April when the Fed said it saw moderate growth throughout the country.

“Four districts explicitly noted that the pace of growth had slowed since the prior period,” the Fed said.

The Beige Book is a report based on anecdotal information collected by the Fed’s 12 regional banks. It is compiled by the Philadelphia Fed and published eight times a year, typically a couple of weeks before the Federal Open Market Committee meets to set monetary policy. The FOMC’s next meeting is scheduled to begin June 14 and conclude on June 15.

The June report noted that manufacturing growth continued in most districts. Retail contacts mentioned some softening as consumers balked at higher prices. The Fed said residential real estate contacts observed weakness due to high prices and rising mortgage rates.

Many businesses continue to report difficulties finding workers as their greatest challenge. Supply chain disruptions was the second biggest challenge.

Eight Fed Districts say that expectations for future growth have diminished and contacts in three districts—Boston, Philadelphia, and Dallas—said they are worried about a recession. China’s Covid lockdowns were mentioned by contacts in the Boston, Cleveland, Chicago, San Francisco, Dallas, and Kansas City districts.

Inflationary pressures are described as “strong” or “robust” by most districts, especially for input prices. Two districts noted that rapid inflation was a continuation of the pre-existing trend while three—Philadelphia, Boston, Richmond—said that price increases had moderated. About half of the districts reported that businesses maintain pricing power, passing on costs to clients and customers. More than half, however, cited customer pushback against the inflated prices, either with smaller order volumes or switching to less expensive brands.

A Missouri manufacturer noted that industry attitudes toward price increases have shifted, with sales staff and customers “numb” to continued increases. Some businesses in the St. Louis District said they have started to warn customers of price increases several months in advance.


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