The U.S. economy has experienced a slowdown over the past six weeks, driven by weaker hiring and concerns from both consumers and businesses about tariff-related price increases, according to the Federal Reserve’s latest Beige Book report released on Wednesday. The report highlights that economic activity has slightly declined since the previous update on April 23. “All districts reported high levels of economic and political uncertainty, leading to hesitation and caution in both business and household decision-making,” the report noted. Hiring remained “unchanged” in most of the 12 Fed districts, with seven describing employment as “stable” amid a broad rise in applications and reduced staff turnover. “All districts reported lower labor demand, citing reduced working hours, hiring pauses, and plans for workforce reductions. Some districts reported layoffs in specific sectors, though these were not widespread,” the report stated. Regarding inflation, the report described a “moderate” pace of price increases. Many contacts anticipated accelerated cost and price hikes in the future, with some districts labeling these expected increases as strong or significant. All districts reported that tariff hikes were pushing costs and prices upward. However, there were mixed expectations about price increases, as some businesses indicated they might reduce profit margins or add “temporary fees or surcharges.” The report covers a period of shifting tariff policies under former President Donald Trump. In early May, Trump announced a relaxation of reciprocal tariffs against China, which boosted Wall Street with hopes that tariffs would not be as severe as initially feared. Still, concerns persist about inflationary impacts and whether hiring and the broader economy will slow due to tariff-related pressures. Tariffs were mentioned 122 times in this report, compared to 107 in April. Regionally, Boston, New York, and Philadelphia reported declines in economic activity, while Richmond, Atlanta, and Chicago noted stronger growth. In New York, the Fed observed heightened uncertainty and a sharp rise in input costs due to tariff-driven cost increases. Richmond reported a slight uptick in hiring despite federal government payroll cuts.
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