The pace of the U.S. recovery picked up somewhat in the past two months, sparking price pressures as businesses contended with worker scarcity and rising costs, the Federal Reserve said.

“The national economy expanded at a moderate pace from early April to late May, a somewhat faster rate than the prior reporting period,” the U.S. central bank said in its Beige Book survey released on Wednesday. “Overall price pressures increased further since the last report. Selling prices increased moderately, while input costs rose more briskly.”

The report was based on information collected by the Fed’s 12 regional banks on or before May 25 and compiled by the Cleveland branch.

‘Hot Summer’
Diane Swonk, chief economist at Grant Thornton LLP, wrote in a tweet that the survey shows demand continues to improve faster than supply across the board, which is showing up in prices. “It’s going to be a hot summer for prices and wages -- real test is whether we see shortages persist only 4Q,” she said.

Fed officials are considering how quickly to trim monetary policy support with an increased pace of vaccinations brightening the U.S. outlook. The Federal Open Market Committee will update its quarterly forecasts for interest rates, growth, unemployment and inflation at its June 15-16 gathering.

The Beige Book reported that some businesses were able to take advantage of stronger demand to pass along higher input costs to customers.

“Looking forward, contacts anticipate facing cost increases and charging higher prices in coming months,” the survey said.

Several policy makers including Vice Chair Richard Clarida have said central bankers may be able to begin discussing the appropriate timing of scaling back their bond-buying program at upcoming policy meetings. Patrick Harker, president of the Philadelphia Fed, said earlier on Wednesday that officials should get that debate underway.

Supply Disruptions
The report cited multiple anecdotes of companies struggling with higher input prices, supply chain disruptions and a shortage of workers. In St. Louis, for example, a group of restaurants held a job fair to fill more than 100 positions -- but only a dozen applicants showed up.

Leisure and hospitality firms saw increased business as vaccinated Americans sought to travel more frequently. In New York, hotel occupancy topped 50% for the first time since Covid-19 began and nightly room rates rose, while museums and restaurants saw a rebound.

The FOMC has committed to only begin scaling back the $120 billion monthly pace of its asset purchases after there’s “substantial further progress” on inflation and employment.

U.S. central bankers will get a fresh update on the status of the labor market on Friday. The May employment report is expected to show the addition of 653,000 new jobs, with the unemployment rate dropping to 5.9%, according to a Bloomberg survey of economists.

U.S. consumer prices showed hotter-than-expected inflationary pressures in April. Fed officials have largely written them off as owing to transitory factors associated with supply-chain bottlenecks and the reopening of service industries as the pandemic recedes.

The Fed’s forecasts released in March showed officials don’t expect to raise interest rates from near zero before the end of 2023, even as they sharply upgraded projections for growth and employment this year.

This article was provided by Bloomberg News.