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The Federal Reserve said the economy overall grew at a brisk pace over the past two months amid uncertainty over the supply chain and prices.

Photo: Stefani Reynolds/Bloomberg News

The U.S. economy’s recovery further strengthened going into the summer as consumers spent more on tourism, travel and other services that were restricted earlier in the pandemic, the Federal Reserve said Wednesday.

The Fed, in its latest Beige Book report that collects business anecdotes from around the country, said businesses also reported prices for services and goods increased at an above-average pace. It said supply-chain disruptions became more widespread for both labor and materials, and that businesses reported low inventories and delivery delays.

“While some contacts felt that pricing pressures were transitory, the majority expected further increases in input costs and selling prices in the coming months,” the Fed report said, citing inflation concerns at businesses.

Employers throughout the country also saw varying job gains, with many noting difficulties in finding workers. Wages increased at a moderate pace and demand for low-skilled workers rose, suggesting workers have increased leverage in a tight labor market.

Still, businesses told the Fed they still experienced a persistent worker shortage that became more widespread, coupled with workers quitting or leaving jobs at an above-average pace.

The Fed said the economy overall grew at a brisk pace over the past two months amid uncertainty over the supply chain and prices. “The U.S. economy strengthened further from late May to early July, displaying moderate to robust growth,” the Fed said.

Separately, Fed Chairman Jerome Powell told a congressional panel on Wednesday that inflation will likely remain elevated for the next few months until it begins to taper off. This came a day after the Labor Department reported that inflation accelerated at the fastest pace in 13 years in June. Consumer prices across the board rose by 5.4% in June from the year before.

The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ’s Jon Hilsenrath looks at what consumers can expect next.

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