High raw material prices, tight supply, and weak demand in the automotive sector decelerated momentum in the US economy in July and August, the US Federal Reserve observed in its latest Beige Book report.
The bi-monthly report, which looks at the economic conditions across the 12 Federal Reserve Districts in the US was released on Sep 8. It noted that despite the downtrend, manufacturing, residential construction, transportation, and non-financial services continued to drive the country’s economic engine during the two months under review.
Prices in the manufacturing sector continued to grow amid higher input prices, especially for metals and metal-based products. Prices of construction materials and freight also skyrocketed over the past two months with businesses finding it hard to source materials to fulfill their orders. Auto sales continued to weaken, the report noted, as the semiconductor chips shortage continued to affect inventory levels of all automakers.
Rising concerns over the spread of the Delta variant and restrictions in international travel have dampened the sentiment in some industries like aviation and hospitality, while many other sectors experienced some softness due to labor shortages and disruptions in the supply chain.
The Fed observed that despite the deceleration, overall employment has increased though the pace has remained mixed depending on region and wage growth, with several Fed regions noting a higher growth among low-wage jobs.