Many businesses have lowered their outlooks for the next year, with companies in the Midwest and Great Plains particularly downbeat, according to the Fed Beige Book’s report of conversations with local business leaders around the US.

Overall, the US economy has grown at a “slight to modest pace” since the previous report last month, with deterioration in two familiar areas: manufacturing and agriculture.

“Manufacturing activity continued to edge lower,” the report said. “Contacts in some districts suggested that persistent trade tensions and slower global growth weighed on activity. Agricultural conditions deteriorated further due to the ongoing impacts of adverse weather, weak commodity prices and trade disruptions.”

Price increases remained “modest,” the report said, and labour markets showed “tightness across skill levels and occupations.”

The Beige Book arrives as the Fed’s Open Market Committee prepares to meet at the end of October, with markets anticipating another 25 basis point cut to interest rates.

Appraisals of the strength of US growth are divided at the committee. One group, which includes Esther George of the Kansas City Fed and Eric Rosengren of the Boston Fed, sees a hot labour market with little need for assistance. Another, which includes James Bullard of the St Louis Fed, is concerned about the way continuing trade uncertainty has weighed on business investment and manufacturing.

The labour market remains little changed from the summer — there is some employment growth, with firms unable to find workers. “Labour market tightness across skill levels and occupations was widely cited as a factor restraining hiring,” the report said.

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Consistent with data in September’s employment report from the US labour department, wages rose “moderately,” with higher gains for low-wage workers, such as those who work at restaurants and hotels. In a sign that employers may be trying to hold the line on further wage increases, firms are “broadly” offering bonuses and benefits, which are traditionally easier to walk back in a recession.

St Louis, Mr Bullard’s district, offers a clearer picture of national trends. In hospitality, workers are so confident around St Louis that one firm said some candidates did not even show up for scheduled interviews. Smaller companies were having a hard time matching wage rises by larger firms, and some companies were increasing benefits and looking to hire workers they would not have previously considered.

Companies in St Louis were having trouble passing costs on to consumers, however. Some said they were having a hard time competing on price with online retailers. Others said they could not alter existing contracts with large buyers.

Overall, manufacturing activity had dropped a little since early September. Orders fell in industrial areas of Arkansas and Missouri.

In agricultural areas of Indiana, farmers remained focused on weather and trade, with both production and yields falling for corn and soyabeans, two important exports.

“The outlook among contacts remained relatively pessimistic due to depressed commodity prices and trade uncertainty,” according to the report. “Farmers in southern Indiana also expressed concern over the recent lack of rain.”



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