Businesses across the US are increasingly worried about the nation’s looming “fiscal cliff,” the US Federal Reserve said on Wednesday in its Beige Book survey of regional economies.
While consumer spending has picked up pace in recent weeks, manufacturing has fallen off, the Fed said.
Business owners have been expressing worries about the sharp tax hikes and spending cuts that could hit them if Washington cannot agree on new legislation.
The Fed said that nine of its 12 districts reported modest or better economic growth in the weeks since its Oct. 10 report.
The New York region was weaker due to disruptions from hurricane Sandy that shut the city and surrounding areas down at the end of last month. Growth was also weaker in the Boston and Philadelphia regions, both affected to a lesser extent by the storm.
According to the survey, consumer spending grew moderately in most districts, and the real estate sector gained in a majority of regions.
Results in other industries were mixed from area to area, with the storm that raked the US east coast and hit New Jersey on Oct. 29 benefiting growth in some areas even as it shut down the economy in areas directly affected.
Employment also increased in more than half of districts reported on, with wages growing only modestly, “constrained in part by an abundant labor supply,” the Fed said.
However, manufacturing was generally weaker, with some districts reporting a contraction in the sector, citing the slower global economy.
Across most of the regions reported on, businesses surveyed expressed increasing worries about the looming deficit-slashing policies that may be enacted to deal with the fiscal cliff, which will impact the US from Jan. 1, unless Democrats and Republicans in Washington can negotiate a less harsh plan for reducing the deficit.
Manufacturers in five districts said they were worried about the economy for next year, “in part due to the uncertainty regarding the outcome of the fiscal cliff,” the report said.
Another frequent worry was the global economic slowdown and the impact of that on both business orders and the investment climate.
“A significant global manufacturer reported that growth in the US and worldwide is weak and continues to slow; this firm and another large exporter specifically reported that growth in China is slowing further,” the Fed’s Philadelphia region reported.