Activity in the US economy expanded only “modestly” in the past few weeks, but companies are becoming more upbeat about their prospects as COVID-19 vaccines are rolled out nationwide, the US Federal Reserve said on Wednesday.
However, the employment gains are slow, and companies are again reporting difficulty finding and retaining workers, the Fed said in its “beige book” survey of economic conditions.
Even in the New York region, the only one of the Fed’s 12 districts to see activity slow, businesses “have grown considerably more optimistic about the near-term outlook,” the report said.
Photo: AFP
“Most businesses remain optimistic regarding the next six to 12 months as COVID-19 vaccines become more widely distributed,” the report said, citing information collected through late last month.
“Most districts reported that employment levels rose over the reporting period, albeit slowly,” it said.
Manufacturing remains a bright spot nationwide, although factories are complaining of price increases for inputs and shortages — notably of semiconductors, which has hit the auto industry.
That was part of a wider trend of price increases for components such as fuel, steel and lumber, although few businesses reported raising prices for customers, the Fed said.
Meanwhile, low mortgage rates continue to spur “robust demand” for homes, it said.
In a throwback to the economy prior to the pandemic, when unemployment in the US was at a 50-year low, the beige book reported some companies saying that they had to raise wages for skilled and low-skilled workers, to find and hang onto them in key sectors.
An ongoing issue for employers is the pandemic-imposed closure of schools and daycare facilities, which means, “a significant portion of the potential labor force remains sidelined by childcare responsibilities, especially women,” the Philadelphia Federal Reserve said.
The report was prepared in advance of the meeting later this month of the central bank’s policy-setting Federal Open Markets Committee, although policymakers have said that they would not raise their benchmark interest rate until inflation has passed the 2 percent mark.
Separately, growth in the services sector, where most Americans work, slowed sharply last month, with hurdles related to the pandemic hindering growth, the Tempe, Arizona-based Institute for Supply Management said, as its index of service sector activity dropped to a reading of 55.5 percent, down 3.4 percentage points from January, when activity neared a two-year high.
Even with the decline, it was the ninth straight month of growth in the services sector.
Any reading above 50 signifies growth.
Economists had expected some rollback from the January high, but the size of last month’s drop was much bigger than expected, driven by a sharp decline in the new orders index, which fell to 51.9 percent, down from 61.8 percent in January.
The index readings for business activity and employment also fell from the previous month.
Additional reporting by AP
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