US economy off to a strong start in 2023, according to Fed survey

The Beige Book, which was compiled by the New York Fed, came at the end of Federal Reserve chairman Jerome Powell’s two-day testimony before Congress, in which he opened the door to the possibility of accelerating the pace of interest rate rises should economic data continue to come in strong, while stressing no decision on the March meeting had yet been made.

Policymakers have raised rates aggressively in the past year in an effort to curb inflation that stood at a 40-year high. They slowed the pace of rate increases to a quarter point increase at their last meeting, bringing interest rates to a range of 4.5 per cent to 4.75 per cent.

Companies across the country indicated persistent price pressures, though some were abating. Many districts also noted continued wage growth, and that a lack of childcare was still keeping workers out of the labour force.

There were some glimmers of hope in both the outlook for inflation and the state of the labour market in the report. Many districts saw supply chain issues ease and reported relief in some transportation costs. Companies said labour availability was improving slightly, but finding workers with the right skills or experience “remained challenging”.

A few districts saw “moderate to strong” retail sales growth during a usually slow period, echoed by Mr Powell in his congressional testimony. Retail sales and inflation data showed US consumers remained robust at the start of the year, bolstered by the ample availability of jobs.

Most districts saw strong travel and tourism activity, part of the services sector of the economy that excludes energy and housing, which has shown persistent strength and is worrying policymakers.


“To restore price stability, we will need to see lower inflation in this sector, and there will very likely be some softening in labour market conditions,” Mr Powell said on Tuesday (Wednesday AEDT) in testimony before the Senate.

Most districts also reported subdued housing market activity. Mortgage rates are close to a 22-year high reached in November, according to

Energy activity was largely unchanged, with the Dallas Fed district reporting that labour and supply chain disruptions were weighing on the sector.