Businesses in some parts of the country, while generally upbeat, are concerned about the uncertainty surrounding the impending policies of US President Donald Trump, the Federal Reserve said Wednesday.
The Fed’s survey of the economy also showed that labor markets continue to tighten across the country, with many regions finding it harder to fill positions, but price pressures have not yet raised inflation concerns.
“Some respondents expressed concern about policy changes in the new administration and associated uncertainty,” the Boston Fed said in the so-called Beige Book report, which collects views of economists, business contacts and others nationwide in preparation for the March 14-15 monetary policy meeting.
The Cleveland Fed noted that “the auto industry is concerned about the possible impacts of a border adjustment tax.”
The Trump administration is looking at a possible tax change that would tax imports but not exports, but the auto industry cautions that “auto parts cross borders multiple times prior to final assembly,” and such a tax “would likely result in higher sticker prices” for vehicles.
The Dallas Fed also noted “increased uncertainty” about coming policy changes especially in the manufacturing sector, while the San Francisco Fed cited concerns about the impact of immigration limits on the agriculture sector, “particularly during harvest season,” which could drive up wage costs.
All 12 Federal Reserve districts reported “modest to moderate” economic growth since the start of the year.
“Businesses were generally optimistic about the near-term outlook but to a somewhat lesser degree than in the prior report,” which was released on January 18, the Beige Book said.
While the survey does not have any major red flags that would signal a coming interest rate increase, analysts increasingly are expecting the US central bank to move again this month, given other data reports.
“Pricing pressures were little changed from the prior report,” the Fed survey said, noting most districts reported modest to moderate price increases.
“Overall, businesses said they expected both input prices and selling prices to increase modestly in the months ahead.”
But the Fed’s preferred measure of inflation, the Personal Consumption Expenditures price index, grew at an annual rate of 1.9 percent in January, just below the Fed’s two percent target and a pace not seen since October 2012, according to data released earlier Wednesday.
The PCE price measure has been gaining steadily since August and joins other data showing gradually rising prices, including the consumer price index, which in January posted the largest 12-month increase in nearly five years, to 2.5 percent.
The central bank increased the benchmark lending rate in December, only the second increase in a decade, but did not move in January.
Fed Chair Janet Yellen testified in February that rate hikes were coming and possibly soon, and central bankers speaking this week signaled an move at the next policy meeting is increasingly possible.
While the Fed’s survey said most districts had only seen modest or moderate wage increases, “labor markets remained tight in early 2017, with some districts noting widening labor shortages.”
Nearly every district noted businesses having trouble filling positions, especially for highly-skilled workers like engineers and IT specialists, which is driving wages higher. In addition, it is taking longer to fill these job openings.
Fed policymakers have indicated they expect three rate hikes this year, but the possibility of increased stimulus spending by the Trump administration could prompt more rate increases sooner.
Join GhanaStar.com to receive daily email alerts of breaking news in Ghana. GhanaStar.com is your source for all Ghana News. Get the latest Ghana news, breaking news, sports, politics, entertainment and more about Ghana, Africa and beyond.