U.S. economic growth slowed over the summer as an increase in COVID-19 cases driven by the highly contagious delta variant forced consumers to cut spending, according to a new Federal Reserve report.
In its region-by-region summary of anecdotal information known as the Beige Book, the Fed said overall growth had “slowed slightly to a moderate pace” during the July to August period covered by the report. .
“The deceleration in economic activity was largely attributable to a decline in restaurants, travel and tourism in most districts, reflecting security concerns from the rise of the delta variant,” the Fed said.
Supply chain constraints and labor shortages have also weighed on growth in some sectors, including auto and home sales.
Businesses are also grappling with other issues brought on by the pandemic, including rising inflationary pressures and a shortage of available workers.
THE FED INFLATION GAUGE HAS HIGHER IN 30 YEARS
Employers continued to struggle to integrate new workers, which they said limited business activity this summer. The shortages were caused by increased turnover, early retirements – especially among healthcare workers – childcare needs, difficulties in negotiating job offers and three federal programs increasing labor costs. unemployment benefits, which officially ended on Labor Day.
With the persistent and widespread labor shortage, many companies have reported an acceleration in wages, especially among low-paid workers. In order to attract people to work, employers said they offered frequent raises, bonuses, training and flexible working arrangements.
At the same time, price increases continued to be “steady at a high rate” as companies faced lack of available labor and supply chain disruptions. As a result, some companies have said they anticipate “significant increases in their selling prices in the coming months.”
The report, which sums up information gathered through August 30, comes as Fed policymakers assess how – and when – to start rolling out some of the super-easy monetary policies put in place 18 months ago without triggering liquidation of the market.
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At the Federal Open Market Committee’s July meeting, “most” officials agreed that it would likely be appropriate to start cutting asset purchases before the end of the year, according to meeting minutes. . While a handful have indicated it’s best to wait until 2022, other officials have suggested they want to act as early as next month.
Economists widely expected Fed officials to say they would cut its $ 120 billion monthly purchases of treasury and mortgage-backed securities in September, but the jobs report worse than expected from August could delay those plans.
There are three more Fed policy-making meetings this year: September 22, November 3, and December 15.