A Federal Reserve report published Wednesday shows that the United States has seen very little economic growth for the past two-months.
Though all twelve Fed districts report continued growth, periodic statements by the central bank are not. “Beige Book”Four regions indicated “that growth has slowed in the past period,”
This report includes the time period between mid-April and May 22.
The report also provided broader perspectives on the economy. It stated that most districts had shown price increases risingA “strong or robust pace.” Two districts declared that rapid inflation is a continuation of a trend, while three other said that prices had moderated somewhat.
Half of the districts said that they were still able for companies to pass higher prices onto consumers. However, some reported “customer pressure”, such as lower volume purchase or substituting less costly brands.
According to the report, “surveys conducted in Districts 2 and 3 showed that year-ahead price rises for their selling prices ranged from 4 to 5%; one District even noted that firms’ expectations of pricing have fallen for two quarters consecutively.”
The report also noted weakness in the retail sector as higher prices impacted sales.
The report stated that contacts cited the greatest challenges as labor market troubles, then supply chain disruptions. The report said that the top concerns for household and business planning were rising interest rates, general inflation, Russian invasion of Ukraine and disruptions resulting from Covid-19 cases (especially the Northeast),
This release is coming as the U.S. confronts a dark economic outlook.
First-quarter GDP contracted at a 1.5% annualized paceAtlanta Fed. tracking a second quarter expansion at a 1.3% rate.
On Wednesday, JPMorgan Chase Chief Executive Officer was also announced Jamie DimonAnalysts and investors were warned about darker times ahead. to “brace yourself”A combination of many factors can lead to a convergence.
Dimon has many concerns about Fed starting its “quantitative-tightening” program. It technically began Wednesday. The Fed is starting to shrink the balance sheet of $9 trillion. It was a disruptive process and raised concern about future growth.
The Fed has taken a more aggressive approach this time. eventually allowing up to $95 billion a monthEach month will see roll-off of bond proceeds, beginning in September. In the initial phase, $47.5 billion will be rolled off.
Fed, too raising interest ratesThe United States must combat inflation at its highest level in 40 years.
Jonas Goltermann from Capital Economics stated that shrinking balance sheets of central banks adds another layer of ambiguity in an already uncertain period. QT is an experiment. It has been tested only once in recent history. Central bankers are generally less certain about how balance sheets affect financial markets and the effects of raising or decreasing interest rates on the economy.
The economy has remained afloat because of one important factor: the rapid pace of job gains.
According to the Beige Book, employment rose moderately or even modestly in all areas. However there was some evidence of slowing down or freezing hiring.
However, many companies were forced to work below their capacity due to worker shortages. According to the report, companies responded by continuing to use automation and offer more job flexibility as well as raising wages.