Federal Reserve: Economic Activity Continues Growing

Economic activity has expanded at a modest rate since mid-January, said the Federal Reserve Bank’s latest Beige Book.




Among reporting districts, the overall economic outlook over the next six months remained stable and generally optimistic, although reports highlighted an elevated degree of uncertainty.

Many Districts reported the surge in COVID-19 cases temporarily disrupted business activity as firms faced heighted absenteeism, the report said.  Some districts attributed a temporary weakening in hospitality sector demand to the rise in cases, and severe winter weather was cited as disrupting activity.

As a result, consumer spending generally was weaker than in the prior report.

Reports on auto sales were mixed, the report said.  Manufacturing activity continued to grow at a modest pace, yet all districts noted supply chain issues and low inventories restrained growth, particularly in the construction sector.

Reports from banking contacts indicated some weakening of financial conditions, although loan demand generally was unchanged, the Beige Book said.

Demand for residential real estate generally was strong, although many districts reported no change in home sales because of seasonal trends and low inventories.

Agriculture reports were mixed, as some districts described difficult growing conditions while others benefited from higher crop prices, the report said.

Reports on the energy sector indicated modest growth, the Bank said.




Employment increased at a moderate pace from the last report, the Beige Book said.  Widespread, strong demand for employees remained hampered by equally widespread reports of worker scarcity, though some districts reported scattered signs of improving labor supply.

Many firms had difficulty maintaining their staffing levels, the report said.  This challenge was exacerbated by COVID-19 disruptions in January, though employees and firms recovered more quickly than during previous waves.

Firms continued to increase compensation and introduce workplace flexibility to attract workers—especially in historically low wage positions—with mixed success, the Bank said.

Contacts reported they expected the tight labor market and consequent strong wage growth to continue, though a few districts reported signs that wage growth was moderating.




Prices charged to customers increased at a robust pace across the nation, the Beige Book said.  A few districts reported an acceleration in prices.

Rising input costs were cited as a primary contributing factor across a broad swath of industries, with elevated transport costs particularly significant, the report said.  Labor cost increases and ongoing materials shortages also contributed to higher input prices.

Firms reported an increased ability to pass on prices to consumers, the report said.  In most cases, demand remained strong despite price increases.

Firms reported they expected additional price increases over the next several months as they continue to pass on input cost increases, the Beige Book said.




The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $142.00 to $145.00 per cwt, compared with last week’s range of $140.55 to $143.00.  FOB dressed steers and heifers went for $221.90 to $224.99 per cwt, versus $218.70 to $224.02.

The USDA choice cutout Wednesday was down $0.96 per cwt at $255.72, while select was off $0.18 at $251.34.  The choice/select spread narrowed to $4.38 from $5.16 with 111 loads of fabricated product and 34 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 $1.15 to $1.25 a bushel over the May futures and for southwest Kansas were steady at $0.15 over May, which settled at $7.25, down $0.00 3/4.

The CME Feeder Cattle Index for the seven days ended Tuesday was $159.25 per cwt down $0.42.  This compares with Wednesday’s Mar contract settlement of $158.30 per cwt, up $2.02.