U.S. economy continues growth amid falling optimism

The U.S. economy grew over the past two months, but optimism is falling as retailers and consumers grapple with increasing prices and recessionary fears, according to the Federal Reserve Beige Book. .Contacts continued citing labor market challenges as their No. 1 problem, followed by supply chain disruptions. In response, firms raised wages, offered more job flexibility, and deployed automation. Most manufacturing firms in the Minneapolis Fed region reported hiking wages by at least 5 percent. One transportation contact in the St. Louis Fed region said wages for workers had jumped by at least 20 percent in the past six months. .In the Cleveland Fed region, supply chain challenges, higher costs, and the tight labor market were cited as the main causes of a slowdown in business activity. In the St. Louis region, the economic outlook weakened alongside robust price increases for raw materials and fuel. In the Kansas City Fed region, contacts reported an increasing number of hours worked and accelerating wage growth faster than in recent years to retain workers. "General inflation, the Russian invasion of Ukraine, and disruptions from COVID-19 cases round out the key concerns impacting household and business plans," the Fed said. .Strong or robust price increases, especially for inputs, were reported in most districts. A majority of districts said customers had combatted those price increases by either purchasing in smaller volumes or switching to less expensive brands..Mixed banking conditions were reported. The Chicago Fed region experienced deteriorating financial conditions as equity and bond market participants saw more volatility, higher interest rates, and net declines in asset values. Loan demand in the Cleveland Fed region "increased modestly," and delinquency rates for commercial and consumer loans remained low. Contacts said higher borrowing expenses will lead to an increase in delinquency rates in the coming months. .The ag economy remained strong this spring: Corn, soybean and wheat commodity prices were all high as unseasonably cold and wet weather delayed spring planting across the Upper Midwest. Bird flu continued to devastate poultry farms in the Chicago Fed region, causing egg prices to jump. Though farm income and credit conditions saw further improvements in the Kansas City Fed region, contacts expected conditions to slightly soften in the coming months due to inflation and severe drought in the western and southern regions of the district.