The US economy has continued to grow modestly, but the manufacturing sector is seeing some signs of a slowdown and farms face harder times, the US Federal Reserve reported on Wednesday.
In its regular survey of business conditions across the country between April and mid-May, the Fed found many industries continued to show steady improvement, with activity rising, generally strong demand for labor and few signs of inflation or wage growth.
However, amid the turmoil created by US President Donald Trump’s escalating trade conflicts, the generally upbeat report included a string of subtle warnings and less upbeat assessments.
The Fed cited signs of “slowing” manufacturing, “tempered” consumer spending, “weak” agriculture, “lower” auto sales, “wide variation” among regions in reports on construction and real estate, and “mixed” demand for loans.
The latest “beige book” report comes as anticipation grows that the Fed might cut interest rates to preserve the economic expansion, a possibility Federal Reserve Chairman Jerome Powell hinted at earlier this week.
The modest pace of growth in recent weeks was a “slight improvement over the previous period,” the report said, adding: “The outlook for the coming months was solidly positive but modest.”
GDP growth at the start of the year was stronger than expected, but was supported by inventory building and falling exports, which economists say will not support the momentum. The US economy is expected to slow in the second quarter.
In addition to poor weather and a global supply glut, US exports of key crops have been battered since last year by Beijing’s boycott of soybeans and other exports in retaliation for the tariffs Trump imposed on Chinese goods.
“Outlooks were generally less positive than during the prior reporting period, with tariff and trade negotiations driving up uncertainty,” the Fed report said.
However, the survey of the 12 Fed districts was conducted before Trump announced plans to impose import duties on Mexican goods.
Separately, US service firms expanded at stronger pace last month, driven in part by an increase in employment and business activity.
The Institute for Supply Management on Wednesday reported that its service index rose to 56.9 last month, up from 55.5 in April. Readings above 50 point toward continued growth.
Companies surveyed reported a 4.4-point gain in employment to 58.1, while business activity increased 1.7 points to 56.9.
Still, some companies said they are monitoring the tariffs that Trump imposed on China for possible negative impacts on the economy.
Additional reporting by AP
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