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Beige Book: Beige Book: Economic growth downshifted slightly to a moderate pace in early July through August

Comments in the Fed’s Beige Book

  • The deceleration in
    economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts
  • The other sectors of the
    economy where growth slowed or activity declined were those constrained by supply disruptions and labor shortages
  • Weakness in auto sales was widely ascribed to low inventories amidst the
    ongoing microchip shortage, and restrained home sales activity was attributed to low supply
  • Growth in non-auto retail
    sales slowed a bit in some Districts
  • Reports on the agriculture and energy sectors were mixed across
    Districts but, on balance, positive
  • businesses in most Districts remained optimistic about near-term prospects, though there continued to be widespread concern about ongoing supply disruptions and resource shortages
  • Several Districts noted particularly brisk wage gains among lower-wage workers
  • Even at greatly increased prices, many businesses reported having trouble sourcing key inputs
  • Several Districts indicated
    that businesses anticipate significant hikes in their selling prices in the months ahead
  • Full report

The general thrust is that economic activity has slowed sooner than anticipated and the blame goes toward delta and bottlenecks. Delta is increasingly in the rearview mirror and markets have moved on but bottleneck worries are escalating.

The word ‘stagflation’ will be on the tip of everyone’s tongue in the next few months. That’s exactly what’s happening in the auto sector right now.

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