The U.S. gross domestic product is likely to grow 3 percent this year, about 1.5 percentage points lower than the forecast presented in October 2021.
U.S. economic activity expanded at a moderate pace since mid-February amid elevated inflation, tight labor market and continued supply chain bottlenecks, the Federal Reserve said on Wednesday.
"Demand for workers continued to be strong across most Districts and industry sectors. But hiring was held back by the overall lack of available workers," the Fed said in its latest survey on economic conditions, known as the Beige Book, based on information collected from its 12 regional reserve banks.
Inflationary pressures remained strong since the last report, with firms continuing to pass swiftly rising input costs through to customers. Contacts across Districts, particularly those in manufacturing, noted steep increases in raw materials, transportation, and labor costs. In multiple Districts, contacts reported spikes in prices for energy, metals, and agricultural commodities following the start of the Russia-Ukraine war.
The March consumer price index surged 8.5 percent from a year earlier, the largest 12-month increase in four decades, the U.S. Labor Department reported last week. That compared with a 7.9 percent year-on-year gain in February. Firms in most Districts expected inflationary pressures to continue over the coming months.
FYI, here's a round up of the latest #inflation data across Europe, adding the US and Canada— Julian Jessop ���� ���� (@julianHjessop) April 21, 2022
(UK #CPI measure will top 8% in April following the hike in the Ofgem cap on #energy bills, but most other countries likely to see further rises too)#CostOfLivingCrisis is global pic.twitter.com/evTzH66hHj
"Manufacturing activity was solid overall across most Districts, but supply chain backlogs, labor market tightness, and elevated input costs continued to pose challenges on firms' abilities to meet demand," the Fed said.
Outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices, the Beige Book added. The U.S. economy is on track to grow 3.7 percent in 2022, 0.3 percentage points lower than the January projection, according to the International Monetary Fund's World Economic Outlook report released Tuesday.
Karen Dynan, a senior fellow at the Peterson Institute for International Economics, recently projected that the U.S. gross domestic product is likely to grow 3 percent this year, about 1.5 percentage points lower than the forecast presented last October.