By David Harrison
Washington--Firms lowered their growth expectations for the next six to 12 months as they continued to grapple with the fallout of the slowing global economy and uncertainty over trade, the Federal Reserve said Wednesday.
The U.S. economy expanded at a "slight to modest pace" through early October, the Fed said in a report compiling anecdotes from business contacts around the country known as the "beige book." That was a slightly weaker assessment of the economy than in the previous beige book, released in September.
Spending on nonresidential construction grew more slowly, the Fed said. Manufacturing industries edged down with some contacts saying "that persistent trade tensions and slower global growth weighed on activity."
Faced with fewer orders, some manufacturing firms reduced their headcount, the Fed said. In some cases, employers chose to reduce worker hours rather than cut staff.
Agricultural conditions continued to deteriorate, largely due to weather factors, the report said.
Overall, employers continued to struggle finding workers, the report said, leading to moderately higher wages, particularly in the retail and hospitality industries and among professional and technical workers.
Prices increases remained modest, the Fed said, even though retailers and manufacturers reported higher input costs.
The monthlong strike by workers for General Motors Co. which has idled more than 30 plants has had a limited economic impact so far, the report said.
However, in the Fed's Chicago district, the strike's effect has been noticeable. One auto supplier facing a decline in sales due to the strike chose to cut worker hours rather than laying people off "because he felt that in the tight labor market, it would be too difficult to find new workers after the strike ended," the report said.
Bankers in Philadelphia said they had been hearing more talk about the possibility of a mild recession next year. "However, most indicated that they and their clients felt that the U.S. economy was fundamentally sound and that they were planning (cautiously) for ongoing growth next year," the report said.
The report found a regional variation in firms' outlooks. In the Midwest and Great Plains states, businesses were more downcast than in the West or the South.
In the Kansas City district, for instance, business contacts said manufacturing activity had weakened and several anticipated slower growth in capital spending, in part due to tariffs.
On the other hand, real estate and construction activity in the San Francisco region was strong.
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(END) Dow Jones Newswires
October 16, 2019 14:15 ET (18:15 GMT)
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