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The latest Fed Beige Book said economic growth in the US slowed slightly from early July to August. Nevertheless, the strongest sectors continue to be manufacturing, transportation, non-financial services and residential real estate.

The slowdown observed is largely due to a decline in dining out, travel and tourism brought by concerns over rising coronavirus cases. There are even cases that international travel is restricted for fear of contracting the highly contagious delta strain.

In other sectors of the economy where growth slowed or activity declined, there were problems related to supply disruptions and labor shortages. In particular, weak car sales were largely attributable to low inventories amid a continuing shortage of microchips. Restrained home sales activity, meanwhile, was due to low supply.

Growth in non-automotive retail sales also slowed in some counties, but has grown at a moderate pace nationwide. Residential construction, as a whole, also rose slightly, while non-residential construction grew moderately. Lending trends have varied widely across districts, ranging from moderate to strong. Agriculture and energy reports were also mixed, but are positive overall.

Looking ahead, businesses in most districts remain optimistic about short-term prospects, although there are still concerns over continued supply disruptions and resource constraints. This is because employment continues to recover despite the rate ranging from low to strong. Labor demand also continued to rise, but all counties noted significant labor shortages that limited employment and in many cases impeded business activity. This was fueled by increased staff turnover, early retirement (especially in health care), childcare needs, difficulties negotiating job offers, and increased unemployment benefits. Some districts noted that return-to-work schedules have been rescheduled due to an increase in COVID-19 cases.

So, with persistent and significant labor shortages, a number of counties reported accelerating wage growth, and most of them described it as strong, including all regions of the Midwest and West. Several districts noted particularly rapid wage increases among low-paid workers. Employers are reported to be more likely to resort to bonuses, training and flexible working hours to attract and retain workers.

On the bright side, inflation has stabilized as half of the districts said the rate of price increase was high, while the other half said it was moderate. But with widespread resource scarcity, production price pressures will remain widespread. As such, many districts said they saw significant increases in the cost of metals and metal products, freight and transportation services, and construction materials, with the notable exception of sawnwood, which has dropped from exceptionally high levels. At the same time, many reported problems in finding key resources, although some said it was easier to tolerate cost increases from higher prices. Several said they expect significant price increases in the coming months.