WASHINGTON: US price pressures have strengthened and wages are showing some signs of life after an extended period of mysteriously low inflation, according to a Federal Reserve survey released Wednesday.
The Fed’s so-called beige book survey, which gathers reports from businesses across the nation, offers another sign the central bank is likely to raise interest rates at its final meeting of the year next month.
“Price pressures have strengthened since the last report,” the Fed said.
In addition, “Many districts reported that employers were raising wages as well as increasing their use of signing bonuses.”
A confirmed uptick in inflation would be welcome news to policymakers unnerved by the persistent weakness, even despite solid economic growth and falling unemployment — factors that normally would spur wages and inflation.
Outgoing Fed Chair Janet Yellen again on Wednesday said she believes inflation has remained low due to transitory factors, but she acknowledged that something more persistent could be at play.
Across all 12 Federal Reserve districts, economic expansion persisted over the last six weeks at a “modest to moderate pace,” according to the survey.
And all districts reported that “manufacturing activity expanded.”
The report was released the same day revised Commerce Department data showed the US economy growing at 3.3 percent in the third quarter, its fastest clip since 2014.
Still, the wage increases reported in the survey were described as “modest or moderate.”
Most measures of inflation have remained low in recent months, staying well below the Fed’s two-percent target, which has prompted the central bank to move cautiously on raising the benchmark interest rate.
The October beige book said wages had failed to respond to “widespread” labor scarcity, as employers across the country were reporting difficulty filling positions.
The latest survey showed the cost of construction materials such as lumber was driven higher in part due to continuing efforts to rebuild in southeast Texas after Hurricane Harvey hit in August.
There also were reports of rising prices for transportation, real estate, manufacturing inputs and energy, according to the report.
“In many cases, these increases in transportation and manufacturing were passed through to consumers,” it said.
In the storm-hit Dallas region, conditions had mostly returned to normal but labor shortages persisted and “there were widespread reports of increased wages,” the report said, something echoed in other districts.
In the Saint Louis district, for example, “most firms reported raising starting wages and salaries as a way to attract new workers.”
Among retailers “the outlook for holiday sales was generally optimistic,” while fires in northern California temporarily weighed on shipping volumes.