U.S. Firms Flag Toll Of High Inflation As Growth Slows, Fed Survey Shows

The U.S. economy expanded at a modest pace in from mid-May through mid-July, a Federal Reserve report showed on Wednesday as the central bank struggles to curb inflation running at more than a 40-year high.

The Fed released its latest temperature check on the state of the economy as it pushes ahead with aggressive interest rate hikes that are aimed at cooling demand but also are stoking concerns of a recession.

The U.S. Labor Department reported earlier on Wednesday that consumer prices surged 9.1% in June on an annual basis, driven by higher costs for gasoline, food, rent and other items.

"Several Districts reported growing signs of a slowdown in demand, and contacts in five Districts noted concerns over an increased risk of a recession," the Fed said in its survey, known as the "Beige Book," which was conducted across its 12 districts through July 13. Fed policymakers keep a keen ear on feedback from business contacts around the country as they parse the economic outlook.

The report also noted that substantial price increases were reported across all districts with "most contacts expect pricing pressures to persist at least through the end of the year."