Most of the Midwest grew at a “modest to moderate” pace in September and early October. Those gains, however, were stunted by ongoing labor and supply shortages, according to the Federal Reserve’s most recent Beige Book.
While business, employment and manufacturing activity grew moderately in the Federal Reserve Bank of Chicago district, consumer spending, construction and real estate industry activity stayed flat. Wages and prices increased in both Chicago and the Federal Reserve Bank of Minneapolis region. Corn and soybean harvests in the Chicago Fed area were larger than anticipated and neared record levels.
“Outlooks for near-term economic activity remained positive, overall, but some districts noted increased uncertainty and more cautious optimism than in previous months,” the Fed stated in an overview of the overall U.S. economy. “Robust wage growth continued, and firms increased starting wages to attract talent. Many reported offering signing and retention bonuses, flexible work schedules and increased vacation time to motivate workers to remain in their positions.
In the Cleveland region, economic activity remained strong. “While demand was still solid, supply chain disruptions tempered the pace of sales and output growth,” the Federal Reserve stated. “The expiration of supplemental unemployment insurance benefits and a return to school did little to alleviate worker shortages, and wages continued to rise. This and higher nonlabor input costs put further upward pressure on selling prices.”
Though a majority of Fed districts reported growth in consumer spending, auto sales still experienced widespread declines due to low inventory levels and rising prices.
“Prices of steel, electronic components and freight costs rose markedly during this period,” the Fed stated. “Many firms raised selling prices, indicating a greater ability to pass along cost increases to consumers amid strong demand. Expectations for future growth varied with some expecting [prices] to remain high or increase further while others expected prices to moderate over the next 12 months.”
Travel and tourism varied by district, with some seeing continued or strengthening leisure travel. Others saw declines coinciding with increases in Covid-19 cases and the beginning of the school year.