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Trade jitters weighing on business investment: Fed
WASHINGTON, Sept 13, 2018 (BSS/AFP) – President Donald Trump’s trade wars
have many US businesses on edge, prompting some to delay or cut back on
planned investments, the Federal Reserve reported Wednesday.
In half the country, meanwhile, a tightening labor shortage is also
cutting into sales and causing some companies to delay projects, according to
the Fed’s latest “beige book” survey of the economy, which said inflation
continued to mount.
The world’s largest economy grew at a “moderate pace” in the June-July
period but growth was “below average” in the St. Louis and Kansas City
regions, according the report, while manufacturing slowed in the district
around Richmond, Virginia.
The Fed is widely expected to raise interest rates at its next meeting in
two weeks to keep a lid on growing inflation amid brisk US economic
expansion, steady job gains and historically low unemployment — a policy
that has drawn sharp rebukes from Trump.
“Businesses generally remained optimistic about the near-term outlook,
though most districts noted concern and uncertainty about trade tensions —
particularly though not only among manufacturers,” said the report, which
gathers accounts from local contacts nationwide.
“A number of districts noted that such concerns had prompted businesses to
scale back or postpone capital investment.”
– Worried Indiana, Missouri farmers –
The report said “six of the 12 districts” pointed to instances where the
lack of available workers was eating into sales caused employers to delay
projects.
“Wage growth was mostly characterized as modest or moderate.”
Survey respondents said Trump’s trade wars had driven up prices for
manufacturers and others, which companies planned to begin passing onto
consumers, while also causing prices for key commodities like soy beans to
plummet.
Farmers were particularly worried in the St. Louis region.
“Farmers continued to express concerns over low agricultural commodity
prices resulting from the trade dispute between China and the United States,”
according to the report.
“Contacts in Missouri and Indiana indicated that farmers did not lock in
pre-tariff pricing for a majority of their soy bean crop, leaving them
exposed to current market conditions.”
China, the largest purchaser of US soy exports, slapped stinging
retaliatory tariffs on American exports of the crop, counterpunching against
Trump’s tariffs on $50 billion in Chinese-made industrial and technological
goods that Washington says have benefited from theft of intellectual
property, subsidies and state intervention.
Farmers, retailers and manufacturers have mounted an increasingly robust
lobbying campaign against Trump’s trade wars, vowing a full-court press
against them in advance of November’s hard-fought midterm elections.
Word of businesses holding up investment helped send Wall Street lower
following a midday rally, with stocks ending near flat in New York.
BSS/AFP/HR/1012