The U.S. grew slightly through end the August, a Federal Reserve survey found, but the outlook for the economy over the next year “remained generally weak” because of rising interest rates and nagging labor and supply shortages.
The regular Fed survey, known as the Beige Book , said the sharp increase in prices earlier in the year has begun to fade, but that inflation “remained elevated.” The rate of inflation reached a nearly 41-year high of 9.1% in June .
Shortages of labor and supplies, meanwhile, were less acute but they still posed problems for the economy.
“Overall labor market conditions remained tight,” the Beige Book said, while supply-chain disruptions “continued to hamper production.”
The survey covers the period of July through the end of August.
Here are the highlights from the report:
The U.S. economy was “unchanged, on balance, since early July,” the Fed found.
The housing market tumbled as mortgage rates soared. Companies showed less demand for office space. And auto sales were “muted.”
On the bright side, consumer spending was steady as Americans spent more on leisure and hospitality. It wasn’t all because of high inflation, either.
Still, the report indicated that businesses are more pessimistic.
“The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months,” the Beige Book said.
Nine of the 12 Fed regions across the U.S. reported “some degree of moderation in price increases.” Yet prices are still rising.
Most business contacts “expected price pressures to persist at least through the end of the year.”
The labor market is as tight as ever, the Fed found, and that’s pushing up wages as companies compete for workers.
“Many noted that offering bonuses, flexible work arrangements, and comprehensive benefits were deemed necessary to attract and retain workers.”
“Increased talk of recession” has become more common, the Fed found.
Fed officials say they are not trying to trigger a recession, but they acknowledge there’s a growing risk of one as they try to tame high inflation.
Higher interest rates slow the economy by raising the borrowing costs for consumers and businesses.