US Economic Activity Increases Slightly Amid Rising Tariff Concerns, Fed Survey Reveals
A recent report from the Federal Reserve indicates that U.S. economic activity has experienced modest growth since mid-January, with employment rising slightly and prices increasing at a moderate pace. However, growth has been uneven across various districts, with six regions reporting no change in activity, four seeing modest or moderate growth, and two experiencing slight contractions. Despite these variations, businesses and households remain cautiously optimistic about future economic conditions, though uncertainty regarding President Donald Trump’s trade and immigration policies looms large.
The Fed’s “Beige Book” survey, which offers a snapshot of the nation’s economic mood and is prepared ahead of each Fed policy meeting, highlighted growing concerns among businesses about the impact of tariffs and immigration restrictions. The report noted a significant increase in mentions of uncertainty and tariffs compared to January, reflecting heightened anxiety about how these policies might affect demand, labor markets, and inflation in the future.
Tariff-related issues were particularly prominent in the latest survey, with the imposition of 25% tariffs on most imports from Mexico and Canada, alongside a doubling of tariffs on Chinese goods, raising alarms among businesses. The retaliation from Canada, China, and Mexico has further complicated the outlook, with analysts warning that these actions could lead to higher inflation and slower economic growth, posing a tough challenge for the Federal Reserve in setting its policy stance.
The report also noted a decline in consumer confidence, driven in part by uncertainty surrounding inflation and trade policies. Consumer spending showed signs of slowing, with some areas like auto dealerships and casual dining restaurants noting reduced consumer activity. Businesses are also holding back on investments, fearing that rising tariffs will increase costs and add pressure to already high inflation levels. Overall, while economic expectations remain slightly optimistic, the combination of inflationary concerns and trade uncertainty has tempered the outlook for the coming months.
SOURCE: REUTERS