Tariffs on inputs would lead companies to increase sales prices, with some already doing so as a "preventative" measure.
US economic activity picked up "slightly" in mid-January, the US Federal Reserve (Fed) said in its Beige Book, a document that provides a detailed assessment of the economy by the country's 12 regional central banks.
The document shows that six districts saw their levels of dynamism stagnate, while four registered "modest" or "moderate" growth and two others registered a deterioration.
Overall, consumer spending was lower, with "solid demand" for basic goods and greater price sensitivity for discretionary consumer items, especially among lower-income shoppers.
Vehicle sales fell slightly, while "unusual" weather conditions in recent weeks weakened demand for leisure and tourism services.
Manufacturing activity increased "slightly" or "modestly" in most districts. Fed contacts with the industrial sector expressed concern about "the possible implications of upcoming changes in trade policy."
Construction fell "modestly" in both the residential and non-residential sectors. Similarly to industry, the sector has also expressed "nervousness" about the impact of possible levies on the price of wood and other materials.
The residential real estate market posted "mixed" results, with reports pointing to persistent inventory constraints.
Banking activity was "slightly higher" in the reporting districts and the state of agriculture deteriorated "slightly." Looking ahead, overall activity expectations for the coming months were "slightly optimistic."
EMPLOYMENT AND INFLATION
The report showed a mixed picture of employment, with seven areas reporting no change over the period. Manufacturing and technology lost jobs.
Contacts at the issuing institute also cited uncertainty over immigration and other Trump administration policies as factors influencing current and future labor demand.
As for prices, they rose "moderately" in most districts, although some reported an increase in prices.
The rise in the price of eggs and other food products was affecting the catering industry. Some companies noted that tariffs on inputs would lead to higher sales prices, with some already doing so as a "preventative" measure.
