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Dow Jones NewsApr 23, 7:02 PM UTC
MW 'Pervasive' uncertainty from trade fights depresses outlook for economy, Fed's Beige Book finds
By Jeffry Bartash
The U.S. economy got a short-term boost from buyers trying to avoid tariffs
The Federal Reserve's first deep look at the economy since President Trumped imposed tariffs on the rest of the world showed the U.S. still expanding steadily, but "pervasive" uncertainty threatened to curtail growth in the months ahead.
"Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports," the Fed's so-called Beige Book said.
The Beige Book is produced eight times a year to help guide the Fed on whether to raise or lower U.S. interest in response to changing economic conditions.
It's the first Fed survey of the economy since late February and the first to take into account the sweeping tariffs Trump has put in place.
"The outlook in several [regions of the U.S.] worsened considerably as economic uncertainty, particularly surrounding tariffs, rose," the Beige Book summary said.
The worst globe trade wars since the 1930s - ignited by President Trump earlier this month - has spawned high uncertainty among households and businesses.
Economists say the trade disputes could boost inflation, increase unemployment and potentially even trigger a recession if they drag on.
Yet in the runup to the tariffs announcements, some consumers and businesses sought to avoid price increases by buying now instead of later.
Sales of new autos in particular surged to the highest level in three years due to tariff "front-running."
If autos are set aside, however, the Fed said consumer spending was actually lower since the last Beige Book was posted in late February.
Americans also traveled less and fewer foreign tourists visited the U.S., a trend that could cost the tourism industry tens of billions of dollars this year, economists calculate.
Other key findings:
Employment rose slightly but there was considerable hesitation. The private sector increased the number of new jobs, but employment fell in government and organizations that depend on federal funding.
"Several Districts reported that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions," the Beige Book said.
Inflation, meanwhile, could heat up soon. Prices rose at relatively low levels, but many companies said they expect to pay higher costs for supplies due to the tariffs.
They said they would try to pass the costs onto customers while acknowledging that consumers are resistant to higher prices.
Some businesses might have to accept lower profits, the Fed survey found, if they have to eat the extra costs. Falling profits could also hurt the economy and spur companies to lay off more workers.
-Jeffry Bartash
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04-23-25 1502ET
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