The outlook: The Federal Reserve’s latest deep dive on the economy confirmed the obvious: The U.S. is growing faster, but the recovery is being restrained by widespread shortages of labor and supplies.

The findings from the central bank’s so-called Beige Book largely mirrored the more timely remarks by Fed Chairman Jerome Powell during his appearance in Congress.

While the economy has made lots of progress, Powell said Wednesday, he contends it stills needs a lot of support from the Fed. He pointed to millions of people still being out of work.

Read: A ‘notable’ increase in inflation will ease soon, Powell tells Congress

Big picture: The economy has plenty of momentum. Coronavirus cases are low, most government restrictions have been lifted and Americans are spending plenty of money — consumer spending accounts for about 70% of U.S. economic activity.

“The U.S. economy strengthened further from late May to early July, displaying moderate to robust growth,” the Beige Book said.

By contrast, the Fed characterized growth in the spring as “moderate.”

The biggest problem for the economy right now is the inability of businesses to keep up with the crush of demand. They can’t get enough supplies on time or hire enough people to fill a record number of job openings despite still-high unemployment.

The result: Higher prices for materials and labor. Inflation over the past year has risen at the fastest pace since 2008.

Read: The cost of living surges, CPI shows, as inflation spreads through economy

The Beige Book found plenty of evidence of these shortages throughout the country.

“Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods,” the survey said.

The Fed have insisted for months that the surge in inflation is a temporary phenomenon tied to the reopening of the economy, but Powell acknowledged on Wednesday that prices have risen more than the central bank expected.

Some economists worry the Fed is being too lax about inflation and that it’s easy-money strategy could backfire unless the central bank starts to pull back soon.

Key details: The Beige Book pointed to strong demand for a variety of goods and services, including new and used cars, travel and tourism. Most industries were also growing rapidly.

Yet supply isn’t keeping up with demand, particularly for used cars and new homes.

Businesses told the Fed they’re not sure when they’ll be able to ramp up production to satisfy all the pentup demand. They still can’t get many supplies on time and many open jobs are going unfilled.

“The outlook for demand improved further, but many contacts expressed uncertainty or pessimism over the easing of supply constraints,” the survey said.

These shortages have pushed up the cost of both materials and labor and companies said the recent bout of inflation is unlikely to fade away soon.

“While some [business] contacts felt that pricing pressures were transitory, the majority expected further increases in input costs and selling prices in the coming months,” the Beige Book said.

The July Beige Book covered the the period from late May to July 2. The report is compiled from the 12 Federal Reserve banks spread throughout the country.

Market reaction: The Dow Jones Industrial Average

and S&P 500

rose modestly in Wednesday trades. Stocks had fallen on Tuesday after the bigger-than-expected increase in consumer prices.

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