Bloomberg News/Landov
The outlook: Business contacts were generally positive through early July about the economic outlook for the coming months despite “widespread concerns about the possible negative impact of trade-related uncertainty,” according to the “Beige Book” survey released by the Federal Reserve on Wednesday.
What happened: The survey found that the economy expanded at modest pace from mid-May through early July, little changed from the spring. In line with recent, data, retail sales were up slightly while manufacturing was flat. Price pressures were muted, with the rate of price inflation described as “stable to down.” Firms remain unable to pass along higher input prices to their customers because of “brisk competition.” Reports from labor markets spoke again of tight conditions and modestly higher wages, except for entry level positions where compensation grew at a significant pace.
Big picture: The Fed official is widely expected to cut interest rates after its policy meeting in two weeks and this report did not alter that outlook at all. Fed officials have said a rate cut would guard against potential downside risks to the economy and might also boost inflation, which has been soft since the beginning of the year.
Interesting anecdotes: One report of jobs losses from the trade tariffs came from some manufacturing and high-tech firms in the Boston district, who were affected by higher trade tariffs.
Another firm in the Boston region said it had moved its assembly line from the U.S. to Germany because most of the components came from China and making the product in Germany allowed them to avoid the tariffs.
The brief threat by President Donald Trump to impose 5% tariffs on Mexican goods was mentioned as a significant shock.
Oil and gas drilling activity slipped in the Dallas district as firms pulled back spending and orders for new equipment.
In Idaho, construction firms were debating whether to end drug-testing for new hires.
Farming in the Kansas City district remained weak as weather conditions led to unprecedented delays in corn and soybean planting. Across the country, reduced supply for some agricultural goods boosted prices.
Prices for Broadway theater admissions were down roughly 10% from a year earlier.
Ports along the East Coast saw robust activity, with on reporting record-breaking imports led by furniture. One contact said furniture imports have shifted to other South-Asian countries from China.
Market reaction: Stocks were lower Wednesday on signs of renewed trade tension with China. The Dow Jones Industrial DJIA, -0.20% was recently down 44 points to 27,293.
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