Fed Survey Shows Signs of Slowdown

The economy logged decent but slower growth in the early summer as some consumers tightened their belts. Despite high energy prices, overall inflation remained fairly moderate.

That snapshot of America’s business climate emerged Wednesday from the Federal Reserve Board’s latest “beige book” survey of economic conditions.

All 12 Fed districts generally indicated continued economic growth during June through the middle of July. Still, there were “numerous individual reports pointing to evidence that the pace of growth has slowed,” the survey said.

Most districts reported that consumers, a major force in shaping economic activity, had less of an appetite to spend. That resulted in weaker sales for merchants. In some cases, high gasoline prices were blamed for squeezing household budgets and forcing some people to spend less or reduce shopping.

Sales were “relatively weak among ‘big-box’ retailers and other low-price outlets,” the survey found. Sales were healthy for luxury shops, whose more affluent customers were not as strained by high energy bills.

The report is based on information supplied by 12 regional Fed banks and collected before July 17. Thus, the survey captures the latest run-up in energy prices.

Even though elevated energy prices have stung people and businesses, the report suggested that the nation’s overall inflation climate hasn’t gotten out of hand.

“Increases in the prices of final goods and services generally remained modest,” the survey found. “Manufacturers’ and retailers’ ability to pass cost increases on to final prices varied.”

For instance, companies that provide transportation services have applied fuel surcharges and thus have been able to significantly increase their prices in some markets. Other types of companies indicated “more limited pricing power and smaller increases” in the prices charged to customers.

On another inflation observation, the survey said that increases in workers’ base wages and salaries generally remained moderate overall.

Wage growth is good for workers, but if compensation grows rapidly for a long period of time and is not blunted by other economic forces, it can lead to inflation problems.