The report notes that firms with plans to pass along tariff-related costs to consumers expect to do so within three months
Published Thu, Jun 5, 2025 · 06:14 AM
[NEW YORK] Economic activity declined slightly in the US in recent weeks, indicating tariffs and elevated uncertainty are rippling across the economy, the Federal Reserve said in its Beige Book survey of regional business contacts.
“All districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions,” according to the report published on Wednesday (Jun 4).
Prices increased at a “moderate” pace in the US, the report said. Moreover, “there were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward”. A few regions expected these increases to be “strong, significant, or substantial”.
The report noted that firms with plans to pass along tariff-related costs to consumers expect to do so within three months.
US President Donald Trump has imposed levies on many US imports and threatened even higher tariffs on key US trade partners. This week, he doubled tariffs on steel and aluminium. The ultimate shape and scale of tariffs remains highly uncertain.
Mentions of tariffs came up 122 times in the Beige Book, compared with 107 in the prior report. Variations of the word “uncertain” appeared 80 times.
The Federal Reserve Bank of St Louis compiled the latest edition of the Beige Book using information gathered on or before May 23. The report includes commentary and anecdotes from business leaders and other contacts in each of the Fed’s 12 regional districts. Fed officials next meet Jun 17 to 18.
Most regions described employment as “flat”, and there were widespread comments about uncertainty delaying hiring. All districts noted weaker demand for labour. Wages continued to grow at a “modest” pace.
The report said the outlook remains “slightly pessimistic and uncertain”, similar to the previous Beige Book.
District highlights
Minneapolis: “Employers widely reported that labour availability continued to improve. A Wisconsin contact reported very good attendance at a recent job fair, adding that ‘there were fewer [candidates] wearing pyjamas’.”
Kansas City: “Businesses in both consumer and industrial sectors described a cautious approach to capital expenditures, looking only to pursue ‘no regret’ investments that have shorter payback periods, are smaller in scale and are less sensitive to policy developments.”
Dallas: “Layoffs were noted in the retail sector. A few contacts voiced concern over changes to immigration policy and the impact on the workforce.”
San Francisco: “Many businesses raised their final prices. In some cases, firms explicitly included a separate tariff line for items or contingencies in their price quotes and contracts. One contact observed that price increases that had been implemented in anticipation of certain tariffs were not rolled back once those tariffs were removed.”
Richmond: “A multinational machine manufacturer shut down a domestic product line that sold internationally due to tariffs on exports. A furniture manufacturer reduced the average work week to four days.”
Atlanta: “Contacts reported a slowing of international travellers to the US, and while previously concentrated among Canadian visitors, the slowdown recently expanded to visitors from Asia and Europe. Domestic leisure travel was flat.”
St Louis: “Another restaurant owner in Kentucky noted that customers were coming to dinner, but they were skipping the appetiser and dessert. Retail sales have slightly declined, especially for discretionary items.”
Boston: “A clothing retailer, which typically tags items with prices months in advance, took the rare step to retag items with higher prices to cover the cost of tariffs, and those items will hit store shelves this summer.”
New York: “An upstate wood mill noted that their ability to raise prices to recoup higher costs was constrained by market forces, significantly reducing profit margins. A heavy construction equipment supplier said they raised prices on goods unaffected by tariffs to enjoy the extra margin before tariffs increased their costs.”
Cleveland: “Another contact mentioned that funding cuts led to monies being pulled from major brownfield remediation projects, leaving site cleanups and the consolidation of police, fire and 911 services partially complete.” BLOOMBERG
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