June 02, 2021 | 14:29
Pst... Hey! Prices are Rising... Pass It On!
Kudos to the Cleveland Fed for collecting all the intel needed for the latest Beige Book, which covered developments up to and including May 25. The headline adverb to describe economic activity is now as follows: it "expanded at a moderate pace". Now before you think that it is the same as the April report ("accelerated to a moderate pace"), it is not. It was pointed out, despite identical wording, the expansion was at a "somewhat faster rate".
Got it. So it's the same, but different. What else?
The authors got to the point very quickly (unlike me). The reference to "adverse impacts of supply chain disruptions" showed up in sentence #2; in April, it was sentence #4. The paragraph on economic activity was fascinating .... all areas, from consumer spending and car sales, factory output and housing, were seeing stronger activity but were constrained by tight inventories and supply chain challenges. But the last sentence wrapped it up nicely.....the Fed's business contacts were "optimistic that economic growth will remain solid".
The view on the job market was similar..... labor demand was expected to remain strong, but "supply constrained" in the months ahead. What does that mean? It means that the 'disappointing' 266k increase in payrolls was not an indication that jobs were not available; it meant that employers had problems finding the right workers, or "low-wage hourly workers, truck drivers, and skilled tradespeople" in particular.
And prices? The stories were the same.... moderate increase in selling prices, but a more brisk rise in across-the-board input costs, made worse by supply chain disruptions. But not to worry.... "strengthening demand allowed some businesses... to pass through much of the cost increases..." In fact, "Looking forward, contacts anticipate facing cost increases and charging higher prices in coming months." Doesn't sound so transitory now, does it?
Bottom Line: The good news is, there is far less concern over COVID-19 these days thanks to the vaccines. But, the bad news is, supply issues have replaced it. The word shortage, or some form of it, appeared 53x, up from 37x in the April report. There is always something.