Middle East War Drives Energy Surge; Fed Says US Prices Rising at 'Moderate to Strong' Pace
The U.S. Federal Reserve (Fed) released its Beige Book report on Wednesday, stating that U.S. prices have risen at a 'moderate to strong' pace in recent weeks, primarily due to soaring energy costs from the war with Iran. The U.S. and Israel launched a war against Iran on February 28, leading to Iranian retaliation and a blockade of the Strait of Hormuz, disrupting global oil and gas supplies. The report indicates that inflation pressures have spread to shipping and food sectors, while high-income households show resilient spending, creating a 'K-shaped economy.' The labor market is characterized by low hiring and low layoffs in most districts.
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(CNA Washington, D.C., 3rd, Combined Foreign Reports) The U.S. Federal Reserve (Fed) said on Wednesday that U.S. prices have risen at a 'moderate to strong' pace in recent weeks, mainly due to a sharp increase in energy costs resulting from the war with Iran.
According to an Agence France-Presse (AFP) report, the Fed noted in its Beige Book report reflecting U.S. economic conditions that 'districts indicated that energy cost spikes related to the Middle East conflict were the primary driver of inflation, with effects spreading to shipping, packaging, groceries, and fertilizers.'
The United States and Israel jointly launched a war against Iran on February 28, plunging the Middle East into turmoil. Tehran subsequently launched retaliatory attacks, striking U.S. allies in the region and nearly blockading the Strait of Hormuz.
The blockade of this vital waterway, which carries about one-fifth of the world's oil and natural gas supply, led to a sharp surge in energy prices and severely disrupted global supply chains.
Data released by the U.S. government last month showed that the Fed's preferred inflation gauge rose at its highest annual rate in April since 2023.
According to the newly released Beige Book, many business owners reported that the pace of price increases for goods has not yet matched the rise in non-labor costs, indicating that companies are absorbing some costs by compressing profit margins to maintain revenue.
However, consumer demand among high-income households remains resilient, consistent with what economists call a 'K-shaped economy,' where affluent families can maintain or even increase spending amid a deteriorating economic environment, while more vulnerable households bear a greater impact.
The report described middle-income households as 'trying to make every dollar go further before deciding to spend,' while low-income consumers face increasing financial pressure.
Additionally, overall credit card usage has risen, the frequency of visits to retail stores has decreased, and demand for essential goods has strengthened.
Overall, economic activity grew slightly to moderately in 10 of the Fed's 12 districts, with one district experiencing a slight decline and another remaining flat.
In terms of employment, 11 districts reported little change in employment activity, with only one district seeing moderate growth.
According to the Beige Book, manufacturing was the most active sector for hiring in several districts, driven by increased demand from defense and data centers. This aligns with market expectations that war-related demand and the rapid development of artificial intelligence (AI) technology are boosting labor needs in related industries.
The Fed noted that most districts are currently experiencing a 'low hiring, low layoff' environment, and workers' willingness to change jobs has significantly decreased due to economic uncertainty. (Editor: Xu Ruicheng) 1150604
According to an Agence France-Presse (AFP) report, the Fed noted in its Beige Book report reflecting U.S. economic conditions that 'districts indicated that energy cost spikes related to the Middle East conflict were the primary driver of inflation, with effects spreading to shipping, packaging, groceries, and fertilizers.'
The United States and Israel jointly launched a war against Iran on February 28, plunging the Middle East into turmoil. Tehran subsequently launched retaliatory attacks, striking U.S. allies in the region and nearly blockading the Strait of Hormuz.
The blockade of this vital waterway, which carries about one-fifth of the world's oil and natural gas supply, led to a sharp surge in energy prices and severely disrupted global supply chains.
Data released by the U.S. government last month showed that the Fed's preferred inflation gauge rose at its highest annual rate in April since 2023.
According to the newly released Beige Book, many business owners reported that the pace of price increases for goods has not yet matched the rise in non-labor costs, indicating that companies are absorbing some costs by compressing profit margins to maintain revenue.
However, consumer demand among high-income households remains resilient, consistent with what economists call a 'K-shaped economy,' where affluent families can maintain or even increase spending amid a deteriorating economic environment, while more vulnerable households bear a greater impact.
The report described middle-income households as 'trying to make every dollar go further before deciding to spend,' while low-income consumers face increasing financial pressure.
Additionally, overall credit card usage has risen, the frequency of visits to retail stores has decreased, and demand for essential goods has strengthened.
Overall, economic activity grew slightly to moderately in 10 of the Fed's 12 districts, with one district experiencing a slight decline and another remaining flat.
In terms of employment, 11 districts reported little change in employment activity, with only one district seeing moderate growth.
According to the Beige Book, manufacturing was the most active sector for hiring in several districts, driven by increased demand from defense and data centers. This aligns with market expectations that war-related demand and the rapid development of artificial intelligence (AI) technology are boosting labor needs in related industries.
The Fed noted that most districts are currently experiencing a 'low hiring, low layoff' environment, and workers' willingness to change jobs has significantly decreased due to economic uncertainty. (Editor: Xu Ruicheng) 1150604
FAQ
What is the Beige Book?
It is a report published by the U.S. Federal Reserve eight times a year, summarizing economic conditions across its 12 districts.
What is the impact of the Strait of Hormuz blockade?
It disrupted about one-fifth of the world's oil and gas supply, causing energy prices to surge and global supply chains to be severely disrupted.
What is a K-shaped economy?
It is a polarized state where high-income households can maintain or increase spending during an economic downturn, while lower-income households bear a greater impact.