The U.S. economy expanded at a moderate pace in April through mid-May, a slight improvement over the previous period as firms largely shook off the impact of a U.S.-China trade war, according to the Federal Reserve’s Beige Book.
Almost all of the Fed’s 12 districts reported some gains over the past few months, the Fed said in its region-by-region roundup of anecdotal information known as the Beige Book. A few saw moderate gains in activity. The report, prepared by the Federal Reserve Bank of St. Louis, was based on information collected through May 24.
The report also suggested that despite uncertainties surrounding trade tensions with China and Mexico, the economic outlook for the coming months remained “solidly positive but modest, with little variation among reporting Districts.”
Several respondents reported that some contacts are companies across the country had reported an increase in the length of temporary contracts, as well as less demand for direct hires -- which they believed stemmed from the threat of a trade war with China.
The Dallas Federal Reserve -- which is home to a number of businesses involved in the global trade spat -- warned of scattered signs of deceleration in growth.
“Outlooks were generally less positive than during the prior reporting period, with tariff and trade negotiations driving up uncertainty,” the Beige Book said.
The Beige Book found that employment continued to increase nationwide, but noted that hiring was constrained by a tighter labor market. Some districts cited shortages of both high- and low-skill workers, although competition to hire employees applied some wage pressures across a number of occupations.
Policymakers at the U.S. central bank will study the report ahead of their June 18-19 Federal Open Market Committee meeting. This week, Chairman Jerome Powell suggested the Fed could cut the benchmark federal funds rate if trade uncertainties hurt the U.S. economic outlook.
“We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective,” he said in a speech on Tuesday.
Traders do not anticipate the FOMC to cut rates during the June meeting, although some -- including Curt Long, the chief economist at the National Association of Federally-Insured Credit Unions -- think the Fed won't lower rates at all this year.
Long said the Beige Book revealed an economy growing "slowly but steadily," brushing over the volatility in the markets.
"NAFCU expects no Fed action on interest rates this year, with trade policy being the biggest risk to that forecast," he said.