Business activity continued to expand around the country over the last six weeks, with price pressures picking up, primarily because of higher energy costs, the
said in its "beige book" report on economic conditions.
The report didn't represent a dramatic departure from the Fed's recent thinking on the economy, although the language describing inflationary forces was more detailed than in the past.
"Reports from many districts suggested that upward price pressures have strengthened, although actual increases to date in vendor prices and selling prices have generally remained moderate," the Fed noted. "Much of the pressure derives from energy costs, although contacts cited the lower dollar and rising costs of building materials as well."
The Fed said most companies have been able to pass at least a portion of the higher costs they face along to consumers, with a few using them to boost margins. Many districts seemed more concerned about the possible growth-tempering impact of higher energy prices.
"In two-thirds of the districts, retail or tourism contacts expressed concern that high energy prices were already, or could soon be, damping consumer demand," the report read. "Distribution (shipping, trucking, freight, delivery) firms and utilities shared similar apprehensions, having imposed fuel surcharges in many cases."
Some economists have worried that the high cost of gasoline will subdue spending at retail outlets as consumers drive less. That debate wasn't resolved in Wednesday's update, with seven of the survey's 12 regions still showing increased retail sales. New York, Chicago, Dallas, Cleveland and Richmond, Va., had less-encouraging results.
"Contacts in these five districts attributed sluggish spending in part to unfavorable weather conditions, and in part to high or rising energy and gasoline prices. Retail selling prices were described as reasonably stable to date, although some contacts cited evidence of increased prices and pricing power," the report said.