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The U.S. economy grew at a “modest” rate in recent weeks, with consumers continuing to spend and a “generally positive” outlook overall even in the face of disruptions caused by U.S. trade policy, the Federal Reserve reported on Wednesday.

Employment continued to expand and “labour markets remained tight, with contacts across the country experiencing difficulties filling open positions,” the Fed reported in its latest Beige Book compendium of anecdotes from businesses around the country. “The outlook generally was positive for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty.”

The document in summary portrayed an economy that was largely in good shape ahead of a July 30-31 Fed meeting at which the central bank is widely expected to reduce interest rates.

Indeed the apparent durability of the now decade-old U.S. recovery has led some Fed officials to question whether a rate fed cut is needed.

In the southeastern states, some employers reported boosting wages to $15 an hour to compete for entry level workers, manufacturing increased, home sales grew, and “the start of the summer season was robust,” in states like Florida, Georgia and Louisiana, the Atlanta Fed reported. Atlanta Fed president Raphael Bostic is among those who have remained unconvinced rates should be lower.


But the detailed text from the 12 Fed regions showed why the rate cut is likely to proceed, with businesses being forced to adapt on the fly to supply chain, tariff, visa and other problems that may pose broader risks to growth. Linked to both a weakened global economy and to Trump administration policies, those issues provided the major element of doubt in the report’s otherwise optimistic outlook, and have caused some Fed officials to begin shifting their views.

Kansas City Fed president Esther George, among the most concerned about leaving interest rates too low, said Wednesday she was “prepared to adjust those views should we realize some of these downside risks” posed by trade policy and slower growth in China, Europe and elsewhere. George has a voted on Fed rate policy this year and will be faced with the decision of whether to go along with or publicly dissent against a rate cut when the Fed meets in two weeks.

The view from her district was largely positive, with businesses saying they “generally expected a faster pace of growth moving forward,” and no explicit mention of trade-related troubles.

By contrast, the Dallas Fed reported that a survey of 360 firms showed 28% were “negatively affected” by recent tariff hikes, while only 5% felt a positive impact from the Trump administration’s decision to tax Chinese and some other imports.

The Beige Book noted emerging weakness in business for transport companies – a potential ill sign for future growth some analysts noted – and trade-related troubles in manufacturing. It even traced layoffs in some cases to administration-imposed tariffs as companies shifted final production of goods using Chinese parts from the United States to elsewhere.

In the Boston Fed district, one electronic components maker had shifted an assembly line to Germany “because most of the components in the product came from China and making the product in Germany allowed them to avoid the tariffs.”

In Cleveland, “manufacturing continued to weaken because of trade wars, high customer inventories and slowing global growth. Freight haulers saw a modest decline in demand, despite summer’s typically being the strong season, and they are concerned about the future.”

That point was emphasized by poor results reported late Tuesday afternoon by CSX Corp, the nation’s third-largest railroad, that was leading U.S. markets lower on Wednesday.

The Fed reported other firms had experienced “difficulties in securing and renewing” work visas for employees with specific skills.

The Beige Book was compiled by the San Francisco Fed from reports assembled from all 12 regional reserve banks before July 8, a period that included new tariff threats levelled by the president against Mexico, as well as the subsequent lull in those and other trade tensions.

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