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Federal Reserve Beige Book: Moderate economic expansion, the pandemic suppresses the prospects for economic recovery

Federal Reserve Beige Book: Moderate economic expansion, the pandemic suppresses the prospects for economic recovery

U.S. Vice President Mike Pence (center) and Speaker of the House of Representatives Pelosi (right) attend a joint meeting of Congress on January 6 at the Capitol in Washington, D.C. ( Xinhua News Agency, photographed by Kevin Dicky)

Optimism for the economic recovery brought about by the launch of the coronavirus vaccine is weakening.

Federal Reserve released the latest beige book of economic outlook survey prepared by the San Francisco Federal Reserve. The data was collected from 12 local federal reserves, and the deadline for collecting data is January 4 this year.

The report said that the U.S. economy remained moderately expanding, and the optimism of the future outlook of companies has weakened due to the impact of the epidemic.

Overview of the economic situation

Since the last beige book was published, most local feds have reported moderate growth in economic activity, but the overall situation has varied, with two regions stagnation and two other regions slowing down.

The data on consumer spending are mixed. Affected by the worsening of the COVID-19 epidemic and the restrictions taken by various places, retail sales and leisure and entertainment demand in some areas have declined. Most regions report that during the holiday, people are changing from traditional shopping malls to online.

By industry, car sales fell month-on-month, while energy industry mining picked up for the first time since the pandemic. Manufacturing activity continues to recover in almost all regions, despite increasing reports of supply chain challenges.

Residential real estate transactions remain strong, but the commercial real estate market is still weak. The bank lending business has hardly changed, and financial institutions expect the related demand to increase in the coming months with the support of government policies.

The outlook for the COVID-19 vaccine has reinforced the optimism of businesses for growth in 2021, but this optimism has eased due to the recent resurgence of the virus and its impact on business conditions.

Employment and salary

Most regions reported that the labor market continued to recover, but the pace had slowed down and the recovery was insufficient.

More and more local federations said that employment levels had decreased compared with the previous report.

The manufacturing, construction and transportation industries have the strongest labor demand, and some employers have noticed a shortage of employees, especially junior and on-site operational positions, which have increased the recruitment difficulties to some extent by the epidemic.

The leisure and hospitality sectors are being put to the test, and employment has been reduced again due to stricter restrictions.

Most regions reported moderate wage increases as labor market conditions improved.

Some companies limit the movement of employees and guarantee normal operation by increasing wages or benefits, such as year-end bonuses and flexible working arrangements.

Prices

Prices have risen slightly in almost all regions, and the price of the means of production has increased faster than the prices of end products and services, especially construction materials, steel products and shipping.

Energy prices have rebounded, but they are still below pre-epidemic levels. House prices continue to rise, driven by low inventory and rising construction costs.

Recently, terminal bargaining power has improved. In retail, wholesale and manufacturing, some enterprises have mentioned plans to raise prices in the next few months.

Highlights of the Federal Reserve report in some areas:

New York: The labor market deteriorated at the end of 2020, mainly in the service industry.

The economy was affected by the epidemic, consumer spending fell, and holiday sales fell back from last year.

Richmond: The region’s economy grew moderately, with employment and wages increasing slightly.

The real estate market remains strong, while commercial real estate rentals remain weak. Ports and truck traffic are high, and manufacturing activities have shown moderate expansion.

Cleveland: The regional economy has lost some momentum.

The epidemic has suppressed the demand for goods and services, and the supply of the labor market has also been affected. Companies generally say that they plan to hire more workers in the future, and wages and capital investment will rise moderately.

Minneapolis: The regional economy expands moderately.

While the demand for recruitment in businesses has increased, health risks have prevented the workforce from entering the job market. Holiday spending was better than expected, but less than last year, especially for small retailers.

Thanks to the recovery of commodity prices and government assistance, the agricultural sector has continued to improve.

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