U.S. economic activity “downshifted” in July and August due to rising concerns about COVID’s delta variant, as well as supply chain problems and labor shortages, the Federal Reserve’s latest survey of the nation’s business conditions revealed.
The Fed survey, released Wednesday, said the slowdown was largely attributable to a pullback in dining out, travel and tourism in most parts of the country, reflecting concerns about the spread of the delta variant.
The Fed’s report, known as the Beige Book, also said some sectors of the economy had been constrained by supply chain disruptions and labor shortages. It noted particular weakness in auto sales attributed to low inventories caused by a shortage of computer chips.
The survey was based on interviews with the central bank’s business contacts completed before Aug. 30 in the Fed’s 12 regional bank districts. It will be used in discussions when Fed officials hold their next interest rate meeting on Sept. 21-22.
There had been an expectation that Fed officials could announce at this month’s meeting plans to start reducing the central bank’s $120 billion monthly bond purchases, which are being made to help lower long-term interest rates.
However, analysts now say that is less likely given last Friday’s disappointing jobs report. The report showed the economy creating only 235,000 jobs in August, after gains averaging around 1 million per month in June and July. The jobs decline was also attributed to a sharp rise in COVID cases.