EconoFACTS

April 14, 2021 | 14:33

Beige Book (April 14)

Economist

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Sal Guatieri

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Bottom Line: The U.S. economy is accelerating, but also starting to fan prices.

The economy has "accelerated to a moderate pace", a big upgrade from the prior report's view that activity rose modestly. Consumer spending was strong due to stimulus payments, pent-up demand and vaccines, while easing restrictions are boosting tourism and travel. Manufacturing is largely weathering "widespread supply chain disruptions". Optimism was greater than in the last report, largely due to the speedy vaccination program. Employment growth picked up (yep, by over 900,000 in March), but a word of caution on the supply side: "Hiring remained a widespread challenge, particularly for low-wage or hourly workers, restraining job growth in some cases."

And the challenge of finding workers is starting to translate into wage pressures, as "wage growth accelerated slightly overall", notably in industries such as manufacturing and construction. This is forcing some businesses into "raising starting pay and offering signing bonuses to attract and retain employees."

The extra wage push, coupled with rising input costs and supply chain glitches, are now fanning prices, with contacts saying that prices "accelerated slightly since the last report." While "many Districts reported moderate price increases", some said "prices rose more robustly", and "input costs rose across the board." While companies are partly absorbing the cost increases, "There were widespread reports of increased selling prices", and firms "generally expect continued price increases in the near term."

Speaking earlier today, Chair Powell said inflation has been held down for a quarter century by globalization, technology and demographics. He is clearly counting on the same forces to keep inflation in check as he runs the economy hot in the years ahead.