US economic activity expanded at a moderate pace since mid-February, said the Federal Reserve in its monthly Beige Book, a report on economic activity by district.
Several Districts reported moderate employment gains despite hiring and retention challenges, the Beige Book said. Consumer spending accelerated among retail and non-financial service firms, as COVID-19 cases tapered across the country.
Manufacturing activity was solid across most districts, but supply chain backlogs, labor market tightness and elevated input costs continued to pose challenges on firms’ abilities to meet demand.
Vehicle sales remained largely constrained by low inventories, the Fed said. Commercial real estate activity accelerated modestly as office occupancy and retail activity increased.
Districts reported continued strong demand for residential real estate but limited supply, the report said.
Agricultural conditions were mixed, the Beige Book said. Farmers were supported by surging crop prices, but drought conditions were a challenge in some districts, and increasing input costs were squeezing producer margins across the nation.
Outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices, the Fed said.
LABOR MARKETS
Employment increased at a moderate pace during the month, the report said. Demand for employees remained strong across most districts and industry sectors, but hiring was restrained by an overall lack of applicants, though several districts reported signs of modest improvement in availability.
Many firms reported significant turnover as employees left for higher wages and more flexible job schedules, the Beige Book said. Persistent labor demand continued to fuel strong wage growth, particularly for footloose employees willing to change jobs.
Firms reported inflationary pressures also contributed to higher wages and that higher wages were doing little to alleviate widespread job vacancies. But some contacts reported early signs that the strong pace of wage growth had begun to slow.
PRICES
Inflationary pressures remained strong, with firms continuing to pass rising input costs through to customers. Contacts, particularly those in manufacturing, noted steep increases in raw material, transportation and labor costs.
In many districts, contacts reported price spikes for energy, metals and agricultural commodities following the Russian invasion of Ukraine, and several noted that COVID-19 lockdowns in China had worsened supply chain disruptions.
A few reports said input suppliers were making use of more flexible contract terms or only honoring price quotes for 24 hours. Strong demand generally allowed firms to pass through cost increases to customers.
However, contacts in a few districts reported negative sales effects from rising prices. Firms in most districts expected inflationary pressures to continue in the coming months.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $141.48 to $143.62 per cwt, compared with last week’s range of $137.84 to $141.52. FOB dressed steers, and heifers went for $217.03 to $221.15 per cwt, versus $216.67 to $220.09.
The USDA choice cutout Thursday was up $1.35 per cwt at $270.17, while select was off $0.85 at $255.68. The choice/select spread widened to $14.49 from $12.29 with 88 loads of fabricated product and 16 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.50 to $1.60 a bushel over the May futures and for southwest Kansas were unchanged at $0.10 over May, which settled at $7.99 1/4 a bushel, down $0.16 1/2.
Seven heifer contracts were tendered for delivery Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $153.90 per cwt down $0.76. This compares with Thursday’s Apr contract settlement $158.45, up $0.95.