National Summary
Overall Economic Activity
Economic activity has expanded at a modest to moderate pace since mid-January. Many Districts reported that the surge in COVID-19 cases temporarily disrupted business activity as firms faced heighted absenteeism. Some Districts attributed a temporary weakening in demand in the hospitality sector to the rise in cases. Severe winter weather was also cited as disrupting activity. As a result, consumer spending was generally weaker than in the prior report. Reports on auto sales were mixed. Manufacturing activity continued to grow at a modest pace. All Districts noted that supply chain issues and low inventories continued to restrain growth, particularly in the construction sector. Reports from banking contacts indicated some weakening of financial conditions, although loan demand was generally unchanged. Demand for residential real estate was generally strong, although many Districts reported no change in home sales due to seasonal trends and low inventories. Agriculture reports were somewhat mixed, as some Districts experienced difficult growing conditions while others benefited from higher crop prices. Reports on the energy sector indicated modest growth. Among reporting Districts, the overall economic outlook over the next six months remained stable and generally optimistic, although reports highlighted an elevated degree of uncertainty.
Labor Markets
Employment increased at a modest to moderate pace. Widespread strong demand for workers remained hampered by equally widespread reports of worker scarcity, though some Districts reported scattered signs of improving labor supply. Many firms had difficulty maintaining their staffing levels due to high turnover; this challenge was exacerbated by COVID-19 disruptions in January, though workers and firms recovered more quickly than during previous waves. Firms continued to increase compensation and introduce workplace flexibility to attract workers—especially in historically low-wage positions—with mixed success. Contacts reported they expect the tight labor market and consequent strong wage growth to continue, though a few Districts reported signs of wage growth moderating.
Prices
Prices charged to customers increased at a robust pace across the nation. A few Districts reported an acceleration in prices. Rising input costs were cited as a primary contributing factor across a broad swath of industries, with elevated transport costs particularly significant. Labor cost increases and ongoing materials shortages also contributed to higher input prices. Firms reported an increased ability to pass on prices to consumers; in most cases, demand has remained strong despite price increases. Firms reported they expect additional price increases over the next several months as they continue to pass on input cost increases.
Highlights by Federal Reserve District
Boston
Business activity expanded at a slight to modest pace. Labor demand remained very strong, but employment appeared roughly stable. Upward wage pressures remained substantial but eased for some positions. Prices increased moderately. Contacts were optimistic for spring but noted downside risks tied to inflation and supply chain disruptions.
New York
Growth stalled in the latest reporting period, constrained by ongoing supply disruptions, worker shortages, and the Omicron outbreak. Moreover, unusually high absenteeism made it difficult for firms to maintain adequate staff. Businesses continued to report substantial increases in selling prices, input prices, and wages. Despite these challenges, contacts remained optimistic about the near-term outlook.
Philadelphia
Business activity continued to grow modestly during the current Beige Book period, and some sectors remained below pre-pandemic levels. The surge in COVID-19 cases from the Omicron variant caused significant business disruptions before easing. The labor market remained tight with modest growth, while wages and prices grew sharply. However, there were signs that wage and price increases may be plateauing.
Cleveland
The District economy grew at a more modest pace as the Omicron wave temporarily dampened activity in high-contact services. Employment rose moderately. Labor shortages and supply chain challenges resulted in widespread increases in wages, nonlabor costs, and selling prices. Firms expected a solid year for sales, but they were concerned that labor scarcity and supply chain difficulties would persist.
Richmond
The regional economy has grown moderately since our previous report. Firms across a variety of sectors reported modest to strong growth in demand, but many struggled to meet that demand due to shortages of labor and persistent supply chain issues. In many cases, higher costs to businesses were passed through to customers, leading to a continued elevated rate of price growth.
Atlanta
Economic activity expanded moderately. Labor markets remained tight and wage pressures grew. Nonlabor costs rose. Retail sales were strong. Leisure travel softened somewhat. Housing demand was robust. Commercial real estate conditions were mixed. Manufacturing activity was robust. Banking conditions were stable.
Chicago
Economic activity increased moderately. Employment increased strongly; consumer spending, business spending, and manufacturing grew modestly; and construction and real estate activity was up slightly. Wages and prices rose rapidly, while financial conditions deteriorated some. Expectations for 2022 agriculture income moved up.
St. Louis
Economic conditions have remained unchanged since our previous report. Employers reported robust wage increases and continued difficulties finding workers. Firms reported improved ability to pass on price increases and anticipate continued increases. The Omicron COVID-19 variant contributed to decreased activity in the transportation and hospitality sectors.
Minneapolis
The region's economy grew moderately over the first weeks of the year. Price pressures remained strong. Though employment increased overall, many firms reported decreased staffing levels due to higher turnover and recruitment difficulty. Contacts generally felt that wage acceleration was driven by tight labor markets rather than inflation expectations. New entrepreneurs reported quitting their outside jobs or cutting hours.
Kansas City
The Tenth District economy expanded at a modest pace in the first two months of the year. The temporary surge in COVID-19 cases slowed spending and hours worked in the leisure and hospitality sector, but activity rebounded quickly and grew steadily across other services and manufacturing sectors. Prices grew at a robust rate, and nearly all contacts reported they expect cost pressures to persist throughout the year.
Dallas
Expansion in the District economy moderated, with the COVID-19 surge exacerbating labor and supply chain shortages and disrupting demand in certain sectors. Employment rose fairly robustly, and wage growth pushed to new highs. Supply chain issues continued to drive up costs, and prices rose at a rapid clip. Outlooks remained positive, though uncertainty spiked.
San Francisco
Economic activity strengthened moderately over the reporting period. Employment grew further while overall conditions in the labor market remained tight. Wages and price levels climbed notably. Retail sales increased strongly, while conditions in the consumer and business services sectors picked up following the peak of the Omicron wave. Lending activity was steady.