Consumers Feel Pinched By Energy, Food Prices
The US economy remained "weak" in May as consumer spending slowed due to higher energy and food prices, the Federal Reserve said.
U.S. businesses were able to raise prices for consumers in some areas even as the economy weakened, the Fed said in its Beige Book summary of economic conditions. This showed that higher energy and commodity prices are causing inflation pressures.
"Business contacts in most districts reported increases in input prices...especially prices for energy, petroleum derivatives, metals, plastics, chemicals, and food," the Fed said.
"Manufacturing contacts in several districts reported some ability to pass along the higher costs to customers," the Fed added.
Not all retailers were able to raise final goods prices, the report said.
Meanwhile, economic activity was generally weak in late April and through June 2, the period covered by the survey, the Fed said.
"It looks like the economy is still very weak," said Gary Thayer, senior economist at AG Edwards & Sons. "Up to this point the Fed has been saying that they expected inflation to moderate in coming quarters and there's some evidence of a weak economy keeping wage gains moderate, but they are saying that rising food and energy prices are hurting consumers. Spending is suffering and that's a potential problem for the economy."
"The Beige Book is a little bit more concerned about inflation and talks about firms having more ability to pass costs along," added Scott Brown, chief economist with Raymond James. "That is upping a notch the concerns about inflation, which is consistent with what the Fed has been saying in the past week."
--Reuters contributed to this report.