Beige Book notes the Fed’s business contacts not convinced inflation is transitory

The U.S. economy displayed “moderate to robust growth” from late May to early July, according to today’s Beige Book released by the Federal Reserve. It commented that “supply-side disruptions became more widespread” and residential construction softened in several districts due to rising costs. There was a slight to modest increase in bank lending activity in most districts. “The outlook for demand improved further, but many contacts expressed uncertainty or pessimism over the easing of supply constraints,” economic activity summary concluded.

Labor demand was healthy and broad-based, but today’s Beige Book notes it was “strongest for low-skilled positions.” Wages increased modestly on average, with labor shortages often cited as a reason firms couldn’t staff at desired levels. “All districts noted an increased use of non-wage cash incentives to attract and retain workers,” today’s summary said.  

Prices were also strong, rising "at an above-average pace," the Fed said, with its business contacts uncertain that higher inflation would fade soon. “While some contacts felt that pricing pressures were transitory, the majority expected further increases in input costs and selling prices in the coming months,” the Fed reported.