US businesses are feeling more optimistic as vaccinations against COVID-19 become common, and economic activity accelerated moderately in recent weeks, the US Federal Reserve said on Wednesday.
However some areas are seeing prices rise, both as a consequence of supply-chain snarls and increasing demand, as consumers resume daily life with COVID-19 less of a threat, the Fed’s “beige book” survey of economic conditions found.
In the period from late February to early this month, economic activity increased to “a moderate pace,” while “consumer spending strengthened” and “manufacturing activity expanded further” with half of the Fed’s districts “citing robust growth,” the survey said.
“Outlooks were more optimistic than in the previous report, boosted in part by an acceleration in COVID-19 vaccinations,” it added.
The report showed that signs of complications resulting from reopening the economy after the COVID-19 pandemic forced many businesses to downscale or modify operations for almost one year, with supply-chain disruptions stopping firms from meeting some orders.
“Severe myriad supply constraints continued to hamper potential growth from demand described as ‘on fire,’ and activity remained below levels attained prior to the pandemic,” the Philadelphia district reported.
There were also signs of price increases, which is a dynamic that is to be closely watched, given the massive government spending that has prompted fears from Wall Street and some economists that the world’s largest economy is set for a prolonged spike in inflation.
“Input costs rose across the board, but especially in the manufacturing, construction, retail and transportation sectors — specifically, metals, lumber, food and fuel prices,” the report said. “Cost increases were partly attributed to ongoing supply-chain disruptions, temporarily exacerbated in some cases by winter weather events.”
With the economy still short millions of jobs that existed before the pandemic, the survey said that most districts reported “modest to moderate increases in headcounts,” with the strongest gains seen in manufacturing, construction, and leisure and hospitality — the sector most devastated by the virus.
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