By Hannah Lang 

Most businesses are optimistic about the economic recovery this year as coronavirus vaccines are more widely distributed and hiring picked up slowly across the country, a Federal Reserve report said Wednesday.

The Fed's periodic compilation of anecdotes from business contacts, known as the Beige Book, said the U.S. economy continued to grow modestly in the first several weeks of 2021, though some industries, such as leisure and hospitality, continued "to be restrained by ongoing Covid-19 restrictions."

"Economic activity expanded modestly from January to mid-February," the report said, adding that "most businesses remain optimistic regarding the next 6-12 months."

The Fed said the economy expanded in eight of the Fed's 12 regions, with areas including the Northeast reporting mixed or stagnant results. The New York area economy declined modestly and the Boston area saw mixed results, the report said.

Overall manufacturing activity increased moderately despite supply-chain challenges, the report said, and nearly every region reported manufacturing growth. In Philadelphia, manufacturers told the Fed they have noticed longer delivery times, growing backlogs and increased demand from customers around the globe.

The leisure and hospitality industry continued to struggle in most regions of the country, but some contacts reported a brightening outlook. In Boston, hospitality businesses were "optimistic for the first time since the pandemic began," the report said.

While the report said business contacts expect hiring to pick up, it also said many businesses are having trouble finding workers, particularly in low-skill occupations and skilled trade positions. "Constraints on labor supply included those related to Covid-19, child care, and unemployment benefits," the report said.

Business costs such as materials rose moderately from January through mid-February, the Fed said, widely attributed in many regions of the country to supply-chain disruptions and high demand in areas such as housing.

Separately, surveys of purchasing managers released Wednesday showed services businesses continued to expand in February.

Data firm IHS Markit said its U.S. services index increased to 59.8 in February, from 58.3 in January, while the Institute for Supply Management's services index slipped to 55.3 in February, from 58.7 the prior month. A reading above 50 indicates growth, while a level below 50 signals contraction.

Chris Williamson, IHS Markit's chief business economist, said an upturn in new orders powered broad-based services industry improvement. "Even some hard-hit consumer-facing sectors are enjoying some loosening of restrictions or adapting to life with the virus," he said.


(END) Dow Jones Newswires

March 03, 2021 16:22 ET (21:22 GMT)

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