Fri, Oct 26, 2018 - Page 10 News List

US firms face price hikes, labor shortages: Fed report

AFP, WASHINGTON

US Federal Reserve Chairman Jerome Powell speaks at a news conference in Washington on Sept. 26. US President Donald Trump on Tuesday launched a fresh assault against Powell, saying he threatened economic growth and seemed to enjoy raising interest rates.

Photo: AFP

US firms nationwide complain trade disputes with China and others are boosting the prices of key inputs, while they continue to face widespread labor shortages, the US Federal Reserve said on Wednesday.

The ongoing difficulty in filling open positions at all skill levels and in every region is delaying projects and pressuring firms to raise wages or benefits — or even employ robots to ramp up production — according to the Fed’s latest “beige book” survey of the economy.

While the reports from the Fed’s regional banks reflected a healthy US economy, with “modest to moderate growth,” US President Donald Trump’s aggressive tariff strategy, which has drawn retaliation from trading partners, is potentially adding fuel to inflation.

The central bank is watching price pressures closely to gauge how fast and how far to raise the benchmark lending rate to allow the economy to continue to grow without an acceleration of inflation.

The Fed has raised the key interest rate three times this year and is widely expected to increase by another 0.25 percentage points in December.

“Manufacturers reported raising prices of finished goods out of necessity as costs of raw materials such as metals rose, which they attributed to tariffs,” the Fed report said.

Some firms are not able to pass on cost increases to customers, and in Philadelphia companies reported “difficulty meeting the prices of foreign competitors who are not exposed to tariffs on the primary input commodities of their products.”

The Fed said wages only rose “modestly or moderately” in most of the country — the San Francisco region was a notable exception — but the increases were widespread throughout the nation.

One staffing firm in Philadelphia said that “resistance to raising starting wages softened further among their clients after years of holding wages steady.”

However, with shortages of entry-level and skilled workers, companies have also used non-salary options to attract and retain qualified workers, including signing bonuses, more flexible hours and added vacation.

The report included anecdotes of companies unable to expand or boost production because of a lack of workers at all levels.

One had a project delayed by six weeks because it could not find an elevator technician.

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