Quick Beige Book review - high inflation the cure for high inflation, profit margin pressures growing

I'll argue again that the US economy's growth rate sounds and feels like something around 1.5%. Maybe the Fed's Beige Book agrees with me as it said today that for the most recent period, "Economy activity maintained a slight to modest pace of growth in a majority of Districts this reporting cycle. However, while seven Districts reported some level of increase in activity, five noted flat or declining activity—three more than in the prior reporting period."

With respect to the labor market, "On balance, employment rose at a slight pace in the most recent reporting period. Most Districts reported employment was flat or up slightly, while a few Districts reported modest employment growth. Several Districts reported declines in employment in the manufacturing sector due to slowdowns in new orders. Skilled-worker availability remained a challenge across all Districts; however, several Districts reported some improvement in labor supply conditions. Additionally, labor turnover was lower, which reduced demand to find new workers. Looking ahead, contacts in several Districts expect to be more selective on who they hire and not backfill all open positions."

On the consumer, "Household spending was little changed this period according to most District banks."

And on prices, "Prices increased at a modest pace overall, with a couple Districts noting only slight increases. While consumer spending was generally reported as showing little to no change almost every District mentioned retailers discounting items or price-sensitive consumers only purchasing essentials, trading down in quality, buying fewer items, or shopping around for the best deals. Most Districts noted that input costs were beginning to stabilize; however, Atlanta specifically noted products like copper and electrical supplies have seen a notable increase over this period."

The interesting dynamic that we're seeing is that the cumulative rise of about 20% in inflation over the past few years is what is resulting now in the disinflationary trend as consumers push back. I guess high inflation cures high inflation. 

But we can't rest easy, with the possibility of profit margin squeezes.