WASHINGTON — The Federal Reserve’s Beige Book report on Wednesday said the pace of economic growth moderated from mid May through late June as retailers continued to feel the squeeze on margins due to higher cotton and other raw material costs.

Despite the moderation in economic growth, consumer spending increased across the country, the Fed’s snapshot of economic activity showed.

“Falling gasoline prices throughout most of this reporting period may have encouraged a pickup in shopping trips and some additional spending,” the Fed said.

Retail sales, excluding autos, were “modest” in New York, Cleveland, Chicago, Minneapolis and Dallas. Philadelphia and Kansas City reported “relatively strong” retail sales growth, but the results were mixed in Boston, Richmond, Atlanta and San Francisco. The only region reporting a slowdown in retail sales was St. Louis.

But merchants continued to be cautious about margin pressure arising from high cotton prices, which are beginning to be passed through to consumers.

Retailers in half of the districts covered by the Fed reported upward pressure on margins from rising raw materials and food and energy costs, and concerns about cotton “was often mentioned,” according to the report.

“Sharply higher cotton prices are expected to push up clothing prices moderately in the second half of the year,” the Fed said in its analysis of economic activity in New York, where one major retail chain said it had raised prices moderately on some lines, while another merchant said discounting had picked up more this year.

Several retailers in Boston also said they were experiencing price pressures on commodities, including cotton, paint and copper.

In Richmond, retailers warned of rising apparel prices due to higher cotton and wool prices, and several apparel merchants said apparel sales fell, with the exception of higher-end clothing. A few retailers said mid-price items “languished in recent months and customers bargained for discounts.”

Apparel and accessories sales were strong in Chicago and Dallas as consumers continued to take advantage of discounting and early summer promotions, the Fed said.

load comments
blog comments powered by Disqus