Rising interest rates, inflation again limit U.S. economic growth

U.S. economic activity was limited in recent weeks as interest rates and inflation continued to limit growth, according to the Federal Reserve’s Nov. 30 Beige Book.

 Despite the lack of economic growth, inflation showed signs of cooling. In the Federal Reserve Bank of Chicago region, costs remained high but dropped from previous months for energy, shipping and raw materials. 

Wage pressures were prevalent in the Minneapolis Fed region due to both intense competition between companies and inflation. Construction and professional services companies reported raising wages by more than 5 percent, though they expect future raises will be lower.

“Hiring and retention difficulties eased further, although labor markets were still described as tight,” the report stated. “Scattered layoffs were reported in the technology, finance and real estate sectors. However, some contacts expressed a reluctance to shed workers in light of hiring difficulties, even though their labor needs were diminishing.” 

U.S. prices for lumber and steel fell, but food costs increased or remained at high levels in other areas. “The pace of price increases slowed on balance, reflecting a combination of improvements in supply chains and weakening demand,” the Fed stated. “Retail prices faced downward pressure as consumers increasingly sought discounts.”  

Expectations for ag profits were up across the Upper Midwest in recent weeks, reflecting strong corn and soybean harvests. Ag conditions in the Minneapolis Fed region remained strong through the fall harvest. 

Manufacturing activity was mixed across districts but slightly increased on average. Commercial leasing weakened slightly, and office vacancies increased. Bank lending fell amid weak demand and tougher credit standards.

 “Demand for nonfinancial services was flat overall but softened in some districts,” the Fed stated. “Higher interest rates further dented home sales, which declined at a moderate pace overall but fell steeply in some districts.”