U.S. factories have raised their prices because of tariffs, although inflation has appeared modest or moderate in most parts of the country, the Federal Reserve said on Wednesday in its latest report on the economy.
The U.S. central bank also said in its latest “Beige Book” report that the economy appeared to be growing modestly to moderately and that businesses across a number of industries had reported labour shortages.
The report, a snapshot of the economy gleaned from discussions with business contacts in the Fed’s 12 districts between September and mid-October, detailed business worries about the Trump administration’s trade war with China and simmering tensions with other major trading partners.
“Manufacturers reported raising prices of finished goods out of necessity,” the Fed said, adding that the reason given for the price hikes was higher costs for raw materials such as steel, “which they attributed to tariffs.”
Still, the Fed signaled that inflation pressures did not appear very high. “Prices continued to rise, growing at a modest-to-moderate pace in all districts.”
The Fed has raised interest rates three times this year in a bid to keep prices from rising too quickly. It is widely expected to lift them again in December.
President Donald Trump has slapped tariffs on imports from a range of trading partners, including China, the European Union, Canada and Mexico, prompting retaliation against U.S. exports.
Among manufacturers in the Dallas Fed’s district, which is largely centered on Texas, the Fed said: “Roughly 60 per cent of contacts said the tariffs announced and/or implemented this year have resulted in increased input costs.”
In the Chicago Fed’s Midwestern region, “retail contacts across numerous sectors indicated that they expected consumers to see the impact of U.S. tariffs on imports by early 2019,” according to the Fed’s report.
Despite the trade tensions, the Fed said a tight job market has made it difficult for employers to find qualified workers, including “highly skilled engineers, finance and sales professionals, construction and manufacturing workers, IT professionals, and truck drivers.”