WASHINGTON, April 21 ― American firms are seeing increased business as Covid-19 cases decline across the world's largest economy, even as they struggle with rising prices and scarce staff, the Federal Reserve said yesterday.
The central bank's latest “beige book” survey of business conditions depicted an environment that remains challenging for industries as they seek a return to normal following the pandemic downturn, in an economy that has grown too hot.
“Consumer spending accelerated among retail and non-financial service firms, as Covid-19 cases tapered across the country,” according to the report, which is based on information collected nationwide through April 11.
However, “inflationary pressures remained strong” and companies are “continuing to pass swiftly rising input costs through to customers,” the report said.
While many companies were looking to staff up, “hiring was held back by the overall lack of available workers, though several districts reported signs of modest improvement in worker availability,” the central bank wrote.
The central bank's contacts “noted steep increases in raw materials, transportation, and labour costs,” while prices for farm goods, metals and fuel rose higher following Russia's invasion of Ukraine, and the spike in Covid-19 cases in China, which has caused the country to impose lockdowns.
Those shocks have contributed to the high rate of inflation in the United States, which has prompted the Fed to begin hiking interest rates and signal plans to do so throughout this year.
The report, prepared in advance of the Fed's next policy meeting in early May, said businesses have tried various strategies for coping with both increasing prices and scarce supplies, including “making use of more flexible contract terms or only honouring price quotes for 24 hours.”
“Strong demand generally allowed firms to pass through input cost increases to customers, for example, via fuel surcharges for freight and airline fare,” the Fed added.
Despite the challenging environment, the report contained signs of a return to normal business conditions as the pandemic becomes less severe.
The Philadelphia Fed district said “customer traffic resumed and workers began returning to offices,” while in New York City, “tourism has picked up noticeably in recent weeks” even as hotel room prices climbed. ― AFP