The U.S. economy expanded at a modest to moderate pace in September through early October despite the impact of hurricanes on some regions, the Federal Reserve said in its latest snapshot of the U.S. economy released on Wednesday, but there were still few signs of an acceleration in inflation.
“Despite widespread labor tightness, the majority of districts reported only modest to moderate wage pressures,” the U.S. central bank said in its Beige Book report of the economy, derived from talking to business contacts across the country.
Hurricanes Harvey and Irma hit during the survey period and will have a negative effect on third quarter economic growth, the Fed has said, although it expects the impact to be temporary.
In the report, three of the Fed’s 12 districts – Richmond, Atlanta and Dallas – reported major disruptions from the hurricanes. Most contacts in the Dallas Fed region, which includes hard-hit Houston, said they did not expect significant long-term disruption.
Elsewhere, the report once again highlighted the Fed’s major concern – a lack of evidence of rising inflation despite many districts reporting difficulty finding qualified workers.
Shortages were particularly acute in construction, transportation, skilled manufacturing, and some healthcare and service positions. “These shortages were also restraining business growth,” the Fed said.
However, this did not feed through into higher wages and there also was little change overall in selling prices despiteseveral districts reporting increased manufacturing input costs.
“Price pressures remained modest,” the Fed said.
The Fed has grown increasingly accustomed to hearing reports of strong economic growth and hiring but few accompanying broad-based price pressures, and has recently raised the
possibility that inflation could be mired at low levels for reasons policymakers do not fully understand.
The Fed’s preferred measure of inflation has retreated further from its 2 percent target rate for much of the year andcurrently stands at 1.3 percent.
However, Fed Chair Janet Yellen has also said she still expects inflation to rebound and the central bank appears on course to raise interest rates again in December.