The US economy UU. It expands modestly, but trade tensions weigh, according to a Fed survey

WASHINGTON (Reuters) – The US economy expanded at a modest pace during the last six weeks of 2019, but uncertainty about U.S. trade policy continued to hurt businesses, a survey by the Federal Reserve said on Wednesday. .

FILE PHOTO: Engine smelting blocks, used in a variety of General Motors cars, trucks and crossovers, move down the assembly line at the GM Romulus Powertrain plant in Romulus, Michigan, USA. UU., August 21, 2019. Rebecca Cook / File Photo

“In many districts, tariffs and commercial uncertainty continued to affect some companies,” the Fed said in its report, compiled from anecdotal evidence derived from commercial contacts across the country.

U.S. President Donald Trump and Chinese Deputy Prime Minister Liu signed an initial trade agreement at the White House on Wednesday after 18 months of tariffs between the two largest economies in the world that have uprooted supply chains and slowed global growth.

The Fed cut interest rates three times last year, reversing its course after three years of periodic increases. Fed Chairman Jerome Powell characterized rate cuts as insurance against the slowdown in global growth, trade tensions and moderate inflation to maintain the greatest economic expansion recorded.

Since then, Fed policy makers made it clear that they intend to keep interest rates unchanged in the foreseeable future, citing a boost to the economy of last year’s cuts and the decrease in tensions in the trade war between the United States and China.

But Fed policy makers have warned that the partial trade agreement will not eliminate business concerns, as US tariffs on China will remain in effect until a “Second Phase” agreement is signed.

The latest snapshot of the Fed economy showed that before the agreement was signed, many districts were still suffering. The Richmond Federal Reserve reported that many manufacturers in its district mentioned commercial tensions as a major concern.

“Several increased the prices of final products, but had problems with low profit margins due to tariffs on raw materials,” the report said.

However, the prospect of an agreement had also generated some hope. The Chicago Fed district said it had “boosted farmers’ prospects,” while the Dallas Fed said “overall outlook improved, with less commercial uncertainty that increased optimism.”

Elsewhere in the report, inflationary pressures remained relatively moderate and prices rose at a modest pace. Salary growth was described as moderate to moderate in most districts despite an unemployment rate close to a minimum of 50 years and companies that reported a generalized labor shortage.

Many at the Fed have grown increasingly worried that inflation expectations may be falling. The central bank points to an inflation rate of 2%, but has consistently exceeded it since the goal was introduced in 2012.

US consumer prices UU. They rose a little less than expected in December and the underlying monthly inflationary pressures were withdrawn, the Labor Department said Tuesday.

The Beige Book was prepared by the New York Fed with information collected before January 6.

Report of Lindsay Dunsmuir; Edition by Andrea Ricci

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