The U.S. economy strengthened further over the past two months amid supply constraints and price pressures, according to a Federal Reserve survey released on Wednesday.
"The U.S. economy strengthened further from late May to early July, displaying moderate to robust growth. Sectors reporting above-average growth included transportation, travel and tourism, manufacturing, and nonfinancial services," Fed said in its latest survey on economic conditions, known as the Beige Book, based on information collected from its 12 regional reserve banks.
"Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods," the Fed said, adding many business contacts expressed uncertainty or pessimism over the easing of supply constraints.
The survey also showed that prices increased at "an above-average pace" across the country, as seven Fed districts reported strong price growth and the rest saw moderate gains.
"Pricing pressures were broad-based and grew more acute in the hospitality sector, as the reopening of hotels and restaurants confronted limited supplies of materials and workers," the survey said.
While some business contacts felt that pricing pressures were transitory, the majority expected "further increases" in input costs and selling prices in the coming months, according to the survey.
The release of the survey came after Fed Chair Jerome Powell said earlier in the day that U.S. inflation has increased notably and will "likely remain elevated" in the coming months before moderating.
"Strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind," Powell said at a hearing before the House Financial Services Committee.
"Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy," he said.
Powell also noted that the U.S. economy is "still a ways off" from the progress that the Fed wants to see before tapering the central bank's asset purchases.
The Fed has pledged to keep its benchmark interest rates unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until the economic recovery makes "substantial further progress."