In the early hours of April 24, the Federal Reserve released its latest report on the state of the U. S. economy (beige book) , causing widespread concern in the market.
The report, compiled by the Atlanta Fed, gathered information on business conditions in 12 fed districts as of April 14. The report noted little change in U.S. economic activity since the February report, but uncertainty about international trade policy was widespread in the regional reports. Sales of cars and some non-durable goods were moderately strong in most regions, widely attributed to a rush by consumers to pre-empt tariff-induced price rises. Such buying, however, hardly masks a gloomy economic outlook.
The report makes clear that“Prices are rising across the United States,” with most regions reporting that businesses expect high input cost growth as a result of tariff policies. Many companies have received notice from suppliers that spending is about to rise and have responded to trade policy uncertainty with measures such as tariff surcharges or shorter pricing cycles.
More worryingly, most US companies report plans to pass on additional costs to consumers. The report shows that higher costs are squeezing profit margins in some sectors, especially those directly exposed to consumers, against a backdrop of persistently weak demand.
Companies are also on the sidelines when it comes to hiring because of the uncertain economic outlook. The report said the employment situation in the United States had deteriorated slightly compared with the previous report, with an increase in the number of regions reporting a decline in employment. The most significant reductions were in government jobs or in organizations receiving government funding. Several regions reported that companies were taking a wait-and-see approach to hiring, suspending or slowing hiring until the economy became clearer.