The US economy showed less-than-stellar growth in the final weeks of last year, but produced solid holiday sales and enters the new year with a “modestly favorable” outlook, the US Federal Reserve said on Wednesday.
On the day the US and China signed a long-awaited partial trade truce after months of conflict, the Fed said tariffs continued to weigh on the economy in some regions.
The Fed’s “beige book” survey of conditions nationwide painted a mixed picture, with circumstances improving in the Richmond, Virginia; and Dallas, Texas; regions, but lackluster in the Philadelphia, Pennsylvania; St Louis and Kansas City, Missouri; regions.
“In many districts, tariffs and trade uncertainty continued to weigh on some businesses,” the report said.
However, “expectations for the near-term outlook remained modestly favorable across the nation,” it said.
US President Donald Trump last month relieved some of the pressure on US businesses by canceling a planned round of tariffs on Chinese goods and slashing some others as part of a partial trade deal with Beijing, ending nearly two years of escalating conflict.
The two sides signed the deal on Wednesday.
However, many of the China tariffs remain in place — costs borne by US businesses and consumers, which are weighing on investment and growth — and Trump has also slapped tariffs on European exports, including wine, and threatened to do more.
In the Philadelphia region, the looming wine tariffs “prompted an area merchant to stock up with over 35,000 cases” to beat the sanctions and minimize price hikes, the report said.
Overall economic growth in the area “slowed to a slight pace,” it said.
Across the nation, “holiday sales were said to be solid” in the crucial annual shopping period, while tourism was “mixed” and manufacturing — a sector hit badly by Trump’s trade disputes — was “essentially flat” in most areas.
Labor remained scarce, with employers struggling to fill open positions, a trend that now dates back more than a year.
However, in the manufacturing, transportation and energy sectors, there were job cuts and reduced hiring.
The Kansas City region was mixed, with strong retail sales and solid performance in the professional and high-tech services industries — but manufacturing and transport “continued to decline.”
Fed policymakers cut interest rates three times last year, but said toward the end of the year that they did not expect to do so again unless circumstances changed substantially.
The report was prepared in advance of the Fed’s next policy meeting on Jan. 28 to 29.
Markets overwhelmingly expect policymakers to leave interest rates untouched until November at the earliest.
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