The Beige Book included 47 mentions of uncertainty, up from 17 in the January report, and 49 mentions of tariffs, up from 23 in January and 11 in December. — Reuters
WASHINGTON: US economic activity has risen slightly but unevenly since mid-January, employment nudged higher, and prices increased modestly says the US Federal Reserve (Fed) amid rising uncertainty about how US President Donald Trump’s policies will affect future growth, labour demand and prices.
“Six districts reported no change, four reported modest or moderate growth, and two noted slight contractions,” the US central bank said in its summary of observations from the commercial and community contacts of each of the Fed’s 12 regional banks.
“Overall expectations for economic activity over the coming months were slightly optimistic.”
Known collectively as the “Beige Book”, the document provides a snapshot of the nation’s economic experience and mood two weeks ahead of each Fed policy meeting.
Compared with January, it reflected growing anxiety among businesses across most districts about how Trump’s plans to increase import duties and restrict immigration could affect demand and prices.
The report included 47 mentions of uncertainty, up from 17 in the January report, and 49 mentions of tariffs, up from 23 in January and 11 in December.
Contacts in multiple Fed districts also said rising uncertainty over immigration and other matters was influencing current and future labour demand, the report said.
With all its data collection complete by Feb 24, it may already be stale.
Trump on Tuesday imposed 25% tariffs on most imports from Mexico and Canada, and doubled tariffs on Chinese goods to 20%, actions that many investors and analysts said went far beyond what they expected.
Canada and China immediately retaliated with new import taxes on US goods, and Mexican President Claudia Sheinbaum promised her own response this weekend.
Although the White House on Wednesday said autos coming in through the United States-Mexico-Canada trade agreement would be exempt from the tariffs for a month, some Wall Street economists say the new levies augur stronger inflation and slower growth, a combination that could give the Fed a difficult policy choice.
That challenging mix is already evident in surveys showing rising consumer inflation expectations, slowing business activity, a drop in new factory orders and an increase in prices paid for manufacturing materials.
“Consumer spending was down,” the Cleveland Fed said in observations dovetailing with national consumer sentiment surveys, “and some auto dealers and consumer lenders noted declining consumer confidence related to policy uncertainty and inflation”.
The Atlanta Fed also pointed to a decline in consumer spending, noting that casual dining restaurants said more customers were skipping appetisers and desserts.
Tariff worries were front and centre across the districts.
The St Louis Fed reported prices were rising moderately but were above expectations and tariffs were seen as adding to price pressures later.
“Contacts noted that they were holding off investment due to policy uncertainty and indicated that tariffs would result in higher prices,” it said. “The outlook has declined from slightly optimistic in our previous report to neutral.”
In the Midwest, crop producers “noted higher-than-normal uncertainty given potential for federal policy shifts, especially regarding trade,” the Chicago Fed said. — Reuters
