(Bloomberg) --
Economic activity grew at a “modest pace overall” from Aprilto mid-May, an improvement from the “slight-to-moderate pace”in the prior period, according to the central bank's Beige Bookeconomic survey released Wednesday in Washington two weeks aheadof policy makers' next meeting.
The report is a generally positive -- though not uniformly so --signal ahead of crucial data Friday on employment in May. Arecent string of weak reports on retail sales, factory ordersand home purchases have indicated growth is slowing as PresidentDonald Trump's trade war with China weighs on businesses.
The Beige Book, based on anecdotal information collected by the12 regional Fed banks through May 24, will factor intodiscussions among Fed officials. Policy makers have signaledthey're open to cutting interest rates if escalating tradetensions dim the U.S. economic outlook amid muted inflation.
So far they've stopped short of flagging a move when they nextmeet June 18-19 in Washington, even as investors expect threequarter-point rate cuts in the next year. Investors haveincreased bets the Fed will ease after Trump threatened Mexicolast week with additional tariffs unless it curbs the flow ofmigrants into the U.S.
Nearly all districts reported some growth, indicating they'rehandling the headwinds to the economy well, including thetariffs and a lack of available workers. At the same time, thereare indications of weakness, with some regions citing theuncertainty caused by tariffs, a slowdown in manufacturing, andstruggles in agriculture.
Most districts saw modest or moderate growth in jobs and wages,though regions including Richmond and San Francisco citeddifficulties finding workers or highlighted tight conditions.Overall wage pressures remained “relatively subdued” with someemployers boosting benefits.
Restaurants Closed
In one example of labor pressures highlighted in the report,several restaurants in Charleston, South Carolina, closedbecause they were so short-staffed. One business moved tocounter service and switched to disposable utensils to stayopen.
The Fed said prices increased at a modest pace in most districts-- in line with recent muted inflation readings. At the sametime, firms noted that input prices were rising at a faster pacethan final goods costs, and several regions highlighted higherfreight prices.
Trade and tariffs were mentioned in several regions includingPhiladelphia, which cited uncertainty as delaying businessinvestment. Dallas also said trade uncertainty was weighing onbusiness sentiment.
Some of that may be affecting manufacturing. Richmond, forexample, said factory shipments and new orders declined. Thepicture for commodity inputs was varied across the nation, withsome sources spotting lower steel prices while others said costsremained elevated.
Across the U.S., farms reported struggles. In the Minneapolisdistrict, a wet spring threatens the planting season, with somegrowers saying they might not be able to plant at all this year.
In Kansas City, farm income and credit conditions for producersweakened. Anecdotes from Chicago echoed these troubles, withfarmers challenged by poor weather and low crop prices.
Other messages on the economy were mixed earlier Wednesday. U.S.service industries expanded at the best pace since February,according to an Institute for Supply Management survey, whilethe ADP Research Institute said companies added the fewestworkers to payrolls since 2010.
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