The U.S. economy continues to enjoy a nationwide expansion that is causing labor markets to tighten, the
said in its monthly "beige book" report Wednesday. Pleasing bulls, the Fed said companies continue to have limited luck passing along higher energy prices and other costs to consumers.
All 12 of the regions that report to the Fed said economic activity is expanding, although the New York bank said the pace of growth might have slowed from March. Minneapolis, Kansas City and San Francisco say growth is "solid," while others describe it as "modest," "moderate" or "steady," according to the report.
Along with the state of the housing market, investors are most interested in the report's commentary on labor and other inflation. Financial markets continue to ebb and flow on perceptions of how many more times the Fed will raise interest rates over the next few months.
"The pace of housing market activity is said to be moderating in many districts, while commercial activity is firming," the beige book said. "A majority of districts note that labor markets, at least for skilled workers, are tight or are tightening. While energy costs are high and costs for selected other inputs are rising, businesses continue to have limited ability to raise their selling prices."
The effect of high energy prices on the larger economy has been a preoccupation of the Federal Reserve for at least a year, with crude futures recently topping out at all-time highs. Wednesday's beige book report suggested energy pressures continued to be a looming threat to expansion, if not a growing one.
"High energy prices were at the forefront of most Districts' mentions of cost pressures," the report said. "Manufacturers in most districts cite rising costs for other inputs, with metals mentioned most frequently along with petroleum-related products. While no District reports that cost increases have intensified in the latest survey period, Kansas City says that firms were having greater difficulty obtaining steel and aluminum."
Other price pressures are not making it through to finished products.
"Services firms are also reported to be facing higher costs, notably for utilities, shipping and transportation," the report said. "Many districts describe firms as attempting to raise selling prices but having mixed success, with price increases generally either smaller than the cost increases or less widespread.
"Richmond, Cleveland and Chicago, for example, mention manufacturing firms' limited ability to recoup higher costs; Boston and Dallas say competitive pressures are constraining some price increases, and Atlanta notes that the ability to pass on cost increases varies across firms, depending in part on the strength of demand and contract arrangements."