WASHINGTON—Manufacturers in all 12 Federal Reserve Districts are concerned about the impact tariffs will have on the economy, and many said they've seen higher prices and supply
shortages, according to the latest analysis released as part of the Federal Reserve Beige Book. The Fed further found all districts reporting tight labor markets.
"The Fed's latest report focuses on two key constraints – tariffs and labor shortages," said NAFCU Chief Economist and Vice President of Research Curt Long. "Neither has had a major impact on inflation yet, although price growth has risen recently. But the inflation threat looms large, nevertheless, and is likely to prompt the FOMC to raise rates two more times this year."
To address the labor shortages, the Fed found firms have been adding work hours, converting temporary workers to permanent, bolstering retention efforts and raising compensation, and partnering with local schools.
Federal Reserve Chair Jerome Powell, in testimony before the House Financial Services Committee this week, also warned of economic risks resulting from trade tensions and retaliatory tariffs.
"A more protectionist economy is an economy that's less competitive, less productive," Powell told committee members.
The Beige Book showed moderate or modest economic growth in 10 of the 12 districts. Among the two outliers: the Dallas District reported strong growth attributed to the energy sector, while the St. Louis District saw slight growth, Long said.
Also Worth Noting
Also of note from the report, according to Long:
- Several districts reported slow existing home sales growth, though were not too concerned about rising interest rates
- Prices increased in all districts at a modest to moderate pace
- Several districts saw an uptick in inflation
- Wage increases were modest to moderate