Tar­iff ef­fects broaden across US, wage growth higher — Fed

Business World - - The World -

WASH­ING­TON — Tar­iff-driven price in­creases have spread more broadly through the US economy, though on balance in­fla­tion has risen at a mod­est pace in most parts of the coun­try, the Fed­eral Re­serve said on Wed­nes­day in its lat­est re­port on the economy.

The US cen­tral bank’s Beige Book re­port, a snap­shot of the economy gleaned from dis­cus­sions with busi­ness con­tacts in the Fed’s 12 dis­tricts in the weeks through Nov. 26, also said that the economy ap­peared to be grow­ing mod­estly to moder­ately.

While a wide range of busi­nesses cited con­cerns about the ef­fects of a trade war be­tween the United States and China, firms con­tin­ued to hire and re­ported bump­ing up ben­e­fits and pay to com­pete for an in­creas­ingly scarce la­bor pool.

La­bor mar­kets tight­ened across a broad range of in­dus­tries, and wage growth “tended to the higher side of a mod­est to mod­er­ate pace,” the Fed said.

In the Min­neapo­lis Fed­eral Re­serve Bank’s dis­trict, “la­bor avail­abil­ity was widely seen as the big­gest ob­sta­cle to short-term growth,” the Beige Book said.

The dol­lar held onto slim gains af­ter the re­port was re­leased.

The Fed is widely ex­pected to raise in­ter­est rates at the close of its Dec. 18-19 pol­icy meet­ing.

Pol­icy mak­ers have said the United States’ strong economy could stoke higher in­fla­tion if they do not raise bor­row­ing costs fur­ther.

At the same time, Fed Chair­man Jerome Pow­ell has sig­naled the Fed’s three-year tight­en­ing cy­cle is draw­ing to a close and cen­tral bankers are look­ing for signs a global growth slow­down and a US-China trade war might be weigh­ing on the US economy.

The Beige Book re­port high­lighted the de­vel­op­ing risks that Fed of­fi­cials have be­gun cit­ing more fre­quently as they plan how far to con­tinue their rate in­crease cy­cle.

“Re­ports of tar­iff-in­duced cost in­creases have spread more broadly from man­u­fac­tur­ers and con­trac­tors to re­tail­ers and restau­rants,” the Fed said.

Pres­i­dent Don­ald Trump has slapped tar­iffs on hun­dreds of Chi­nese im­ports, prompt­ing re­tal­i­a­tion against US ex­ports.

The Fed said in­comes and con­di­tions in the agri­cul­tural sec­tor, which has born the brunt of Chi­nese re­tal­ia­tory tar­iffs, were “mixed,” hit by tar­iffs and ex­ces­sive rain­fall. Chi­nese tar­iffs have dis­rupted Amer­ica’s mas­sive soy­bean in­dus­try, with large ship­ments of beans wan­der­ing US wa­ter­ways in­stead of head­ing for China.

In the St. Louis Fed­eral Re­serve Bank’s dis­trict, “lo­cal con­tacts note that barge ac­tiv­ity has in­creased due to the large num­ber of stor­age barges for soy­beans af­fected by re­cent tar­iffs.” —

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