Fed’s Beige Book Highlights Modest Growth as Economy Recovers from Pandemic

The United States Federal Reserve’s Beige Book for February 2021 showed that overall economic activity expanded modestly from January to mid-February for most districts, which reflected in improved business confidence, as most businesses remain optimistic regarding the next 6-12 months.

The optimism is driven by the rollout of Coronavirus vaccines, according to the report that was issued on Wednesday.

Reports on consumer spending and auto sales were mixed. Although a few Districts reported slight improvements in travel and tourism activity, overall conditions in the leisure and hospitality sector continued to be restrained by ongoing COVID-19 restrictions.

The manufacturing activity continues to be challenged by the supply chain disruptions, however, it showed moderate expansion last month.

Meanwhile, some financial institutions experienced declines in loan volumes, but most cited lower delinquency rates and elevated deposit levels.

“Historically low mortgage interest rates continued to spur robust demand for both new and existing homes in most districts, and home prices continued to rise in many areas of the U.S.”

On balance, commercial real estate conditions in the hotel, retail, and office sectors deteriorated somewhat, while activity in the multifamily sector remained steady and the industrial segment continued to strengthen.

Oil and gas production, as well as energy consumption saw a slight uptick, while the agricultural activity improved, and the transportation activity grew modestly.

As for employment, employment levels rose in most districts, albeit slowly, the report indicated, pointing to modest improvements in wages, which are expected to continue to rise over the upcoming months.

“Labor demand varied considerably by industry and by skill level, and many contacts noted continued difficulties attracting and retaining qualified workers.”

In the prices domain, input costs rose moderately, due to higher steel and lumber prices, supply chain disruptions, strong demand, increased transportation that resulted from higher fuel prices. In addition, modest price increases are expected over the next several months, the report stated.