Beige Book: April-May Economy Expands

The US economy expanded at a moderate pace from early April to late May, a somewhat faster rate than the prior reporting period, according to the Federal Reserve Bank’s Beige Book Wednesday.

Several districts cited the positive effects on the economy of increased vaccination rates and relaxed social distancing measures, the bank said.  However, they also noted adverse effects of supply chain disruptions.




The effects of expanded vaccination rates were most notable in consumer spending, where increases in leisure travel and restaurant spending augmented strength in other spending categories, the bank said.

Light vehicle sales remained solid but often were constrained by tight inventories, the bank said.

Factory output increased further despite “significant” supply chain challenges, the bank said.  Manufacturers reported that widespread shortages of materials and labor, along with delivery delays made it difficult to get products to customers.

Similar challenges persisted in construction, the bank said.  Homebuilders often said that strong demand, buoyed by low mortgage interest rates, outpaced their capacity to build, leading some to limit sales.

Nonresidential construction increased at a moderate pace, even though contacts in several districts said supply chain disruptions pushed costs higher and, sometimes delayed projects, the bank said.

Demand for professional and business services increased moderately, while demand for transportation services (including at ports) was exceptionally strong, the bank said.  Lending volumes increased modestly, with gains in household and business loans.

Overall, expectations changed little, with contacts optimistic that economic growth will remain solid, the bank said.




Staffing levels increased at a relatively steady pace during the reporting period, with two-thirds of districts reporting modest employment growth, the bank said.  As the spread of COVID-19 continued to slow, employment growth was strongest in food services, hospitality and retail.

Manufacturers also added employees in several districts, the bank said.  It remained difficult for many firms to hire new personnel, especially low-wage hourly workers, truck drivers and skilled tradespeople.

The lack of job candidates prevented some firms from increasing output and, less commonly, led some businesses to reduce their hours of operation, the bank said.

Overall, wage growth was moderate, and a growing number of firms offered signing bonuses and increased starting wages to attract and retain new staff, the bank said.  Contacts expected labor demand to remain strong, but supply constrained, in the months ahead.

On balance, overall price pressures increased further since the last report, the bank said.  Selling prices increased moderately, while input costs rose more briskly.

Input costs continued to increase, with many contacts noting sharp increases in construction and manufacturing raw materials.  Increases also were reported in freight, packaging, and petrochemicals prices.




Fed cattle traded this week at $119.50 to $120 per cwt on a live basis, steady to up $1.50 from last week.  Dressed-basis trading was at $190 to $191 per cwt, steady to up $2.

The USDA choice cutout Wednesday was up $5.60 per cwt at $340.16, while select was up $5.43 at $311.88.  The choice/select spread widened to $28.28 from $28.11 with 89 loads of fabricated product and 46 loads of trimmings and grinds sold into the spot market.

The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were up unchanged at $1.12 to $1.19 a bushel over the Jul futures, which settled at $6.75 a bushel, down $0.13 3/4.

The CME Feeder Cattle Index for the seven days ended Tuesday was $136.50 per cwt up $0.04.  This compares with Wednesday’s Aug contract settlement of $152.32 per cwt, up $3.17.