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US Economic Activity Tepid But Prices Seen Easing: Fed

Jan. 18, 2023
Although supply chain disruptions have eased in many areas, manufacturers said activity still "declined modestly on average," the Fed's report said.

Economic activity in the United States remained lukewarm in recent weeks, said a report published by the Federal Reserve on Wednesday, with expectations of "little growth in the months ahead."

But selling prices have "increased at a modest or moderate pace," and future price growth is expected to cool further in the year ahead, said the Fed's last "beige book" survey of economic conditions.

Since last year, the Fed has embarked on a forceful campaign to cool demand as inflation soared to decades-high levels, and its moves to steeply raise interest rates have dragged the housing market and cast a pall on consumer spending.

For now, Fed Chair Jerome Powell has said that policymakers need more evidence to provide confidence that inflation is on a sustained downward path.

"Overall economic activity was relatively unchanged" since the last beige book survey released in November, said the latest report.

Five of the Fed's 12 districts saw "slight or modest" gains in activity while six reported either no changes or slight declines, according to the report, which surveys firms and other contacts. One district saw a significant decline.

"Contacts generally expected little growth in the months ahead," the report added.

While some retailers reported better sales over the holiday period, others said that high inflation continued to weigh on consumers, particularly those of low- and moderate-income households.

In December, consumer inflation slipped to the lowest level in over a year to 6.5%, though the figure remains much higher than the Fed's target.

Although supply chain disruptions have eased in many areas, manufacturers said activity still "declined modestly on average," the Fed's report said.

Meanwhile, the interest-sensitive housing markets "continued to weaken" as sales and construction slumped, the report added, noting that residential mortgage demand stayed weak.

In November, sales of existing homes in the U.S. slipped for a 10th straight month, extending a record streak as mortgage rates remained high, according to industry data.

On Wednesday, the Fed report added that employment grew at a "modest to moderate" rate generally, but wage pressures remained elevated.

"Many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if needed," the report said.

Copyright 2023, Agence France-Presse

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