Fed Data Suggest Export Boom Strains Manufacturers, May Stir Inflation Fears
WASHINGTON -- Two new Federal Reserve reports suggest the boom in exports is straining the nation's manufacturers, and could heighten fears of accelerating inflation.</br></br>A survey of economic conditions in the 12 Federal Reserve districts found signs that factories are facing shortages and sharp price boosts for various industrial materials and supplies. The Philadelphia Fed also uncovered evidence that factory wages are rising as a result of worker shortages.</br></br>And a separate Fed report said the nation's factories, mines and utilities operated at 82.9% of capacity in May, higher than at any time since March 1980. Economists say that the closer business gets to operating at full capacity, the greater the risks of a spurt in inflation.</br></br>Separately, the Commerce Department said business inventories grew 0.5% in April, largely reflecting a jump in wholesalers' inventories. Sales by manufacturers, retailers and wholesalers dropped 0.2%. As a result, the ratio of inventories-to-sales increased slightly to 1.51 in April from 1.50 in March, remaining within the range in which the ratio has traveled for the past year.</br></br>As the factory problems noted by the Fed may be interpreted by some as a sign of an overheating economy and more inflation, they could lead the central bank to boost interest rates in the coming months. The Fed's policy committee meets June 29 and 30 to review its credit stance.