Rising energy costs are nagging businesses and increasing their desire to pass them along to customers, although competitive forces are blunting their ability to do so, a Federal Reserve survey suggested Wednesday.
The survey, conducted before oil prices zoomed to a record high of $75.17 a barrel last week, said the economy was growing solidly in the spring even as companies and consumers fretted about high energy prices.
“High energy prices were at the forefront of most districts’ mention of costs pressures,” the Fed survey said. “Many districts describe firms as attempting to raise selling prices but having mixed success, with price increases generally either smaller than the cost increases or less widespread.”
The Fed’s snapshot of economic conditions around the country is based on information supplied by the 12 regional Federal Reserve banks and collected before April 17.
Some companies haven’t been able to pass on to customers all of their higher costs for energy and other raw materials, the Fed survey said. The Boston and Dallas regions said “competitive pressures are constraining some price increases.” The Richmond, Cleveland and Chicago regions mentioned manufacturers “limited ability to recoup higher costs.”
Some regions including Cleveland, Richmond and Dallas, cited high energy prices as the culprit behind weaker than expected tourism, auto sales or retail sales — especially involving lower-income consumers, the survey said.
It said this had the effect of “constraining consumers’ driving and, indirectly, by reducing the income available for purchases after paying for home fuel and transportation fuel.”
The Atlanta and Chicago regions noted the possibility of such energy-cost implications as a risk to the summer economic outlook.
Oil prices have moved off last week’s record high and are now hovering below $72 a barrel — still more expensive than a year ago. Gasoline prices have been marching up and are around $3 a gallon in some areas.
Fed officials closely monitor prices and wages for insights into the nation’s inflation climate.
The survey will figure into discussions at the Federal Reserve’s next meeting to examine interest rates on May 10.
To fend off inflation, economists are predicting the Fed will bump up rates by another quarter percentage point to 5 percent at the May meeting. That would mark the 16th increase of that size since the central bank began to tighten credit on June 2004.
Some analysts believe that will be the last increase for a while. Others, however, believe the Fed could push up its key rate to as high as 5.50 this summer before stopping. In either scenario, economists believe the Fed will end its rate-raising campaign this year.
The future course of rates could come into better focus when Federal Reserve Ben Bernanke talks about the economy’s prospects Thursday in an appearance before Congress’ Joint Economic Committee.
Overall, the Fed survey — along with other barometers — suggest the economy emerged from an end-of-year soft patch and is now motoring ahead.
Analysts predict the economy in the January-to-March quarter grew at a brisk pace of 4.9 percent — which would mark a vast improvement from the anemic 1.7 percent growth rate registered in the final quarter of 2005. The government releases results on first-quarter growth on Friday.
Manufacturing activity strengthened, retail sales were mostly positive and the job market improved, the Fed survey suggested.
“A majority of districts note that labor markets — at least for skilled workers are tight or are tightening,” the survey said. Wages continued to move higher, although the pace of wage growth varied in different Fed regions.
In other parts of the economy, the Fed survey said most regions reported some cooling in the housing market and that demand for mortgages and other consumer loans is ebbing.