BUSINESS Trade uncertainty weighs on US economy: US Federal Reserve

BUSINESS

Trade uncertainty weighs on US economy: US Federal Reserve

Xinhua

16:42, June 06, 2019

WASHINGTON, June 5 (Xinhua) -- A report on Wednesday from the US Federal Reserve (Fed) showed that the United States saw "moderate" economic growth from April through mid-May, while trade tensions kept weighing on the country's economy.

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(Photo: VCG)

"Economic activity expanded at a modest pace overall from April through mid-May, a slight improvement over the previous period," the Fed said in its latest "Beige Book," a periodic economic snapshot.

The "Beige Book" contained economic report from 12 federal reserve districts, which were each monitored by a regional federal reserve bank.

With trade tensions among the United States and other economies remaining unsolved, several Fed districts mentioned the growing concerns of the local businesses in the Beige Book.

New York Fed said that some businesses expressed concerns about trade uncertainty and tariffs, while Richmond Fed said that manufacturers continued to express concerns about the effects of trade policy.

Some districts also mentioned the negative impact of trade tensions on business sentiment. Chicago Fed said that financial market participants noted increased volatility and generally attributed it to investor concerns about the outcome of international trade negotiations.

Additionally, some districts said the trade uncertainty had already taken a toll on local investment and employment.

"Regarding trade policy uncertainty, some transportation contacts developed contingency plans to reduce capital expenditures and headcount to offset tariff-related revenue shortfalls," said Atlanta Fed.

Specifically, some industries had already felt the impact of the trade disputes. According to Boston Fed, "Chinese cellphone manufacturers are big consumers of semiconductors so trade actions against them (as with Huawei, for example) are a big negative for semiconductor-related firms."

Speaking of the outlook of regional economy, Dallas Fed said outlooks were generally "less positive" than during the prior reporting period, with tariff and trade negotiations driving up uncertainty.

With regards to the bigger picture, recent remarks made by top Fed policymakers also sent out much more dovish signals, after seeing weaker economic data and financial market performance in the recent days.

Chairman of the US Federal Reserve Jerome Powell said Tuesday that the central bank is "closely monitoring" current economic developments and "will act appropriately to sustain the expansion."

The Fed in January suspended a three-year cycle of rate hikes amid concerns about downside risks. The current target range for the federal funds rate is at 2.25 percent to 2.5 percent.

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