Many of the Federal Reserve's 12 regional districts heard increased concerns from their business contacts over the economic outlook, according to a new report from the U.S. central bank.
The Beige Book, an anecdotal summary of Fed officials' conversations with their local contacts, found that eight of the 12 Fed districts reported "modest to moderate growth" in the past few weeks.
"Outlooks generally remained positive, but many Districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty," the report said.
It comes as Fed officials try to gauge to what extent their largely positive outlook on the U.S. economy from last year may be shifting. Fed Chairman Jerome Powell, for example, said Jan. 10 that the central bank will be "waiting and watching" for incoming data to determine which economic narrative will define 2019.
His Fed colleagues have adopted a similar tone, saying a lack of inflation pressures give them the ability to be patient on any possible rate hikes. The central bank has penciled in two rate increases in 2019, following its four hikes in 2018.
The Fed report found that the majority of the 12 districts saw an expansion in manufacturing but that "growth had slowed, particularly in the auto and energy sectors." Lower energy prices have led to a ratcheting down of the industry's capital expenditures expectations, the report added. Several of the districts reported modest increases in non-auto retail sales during the holidays, though auto sales stayed largely flat throughout the country.
Most of the country saw job gains, with all districts noting that "labor markets were tight and that firms were struggling to find workers at any skill level." Wages also rose throughout the country, with a majority of districts saying they saw moderate pickups. Several districts also said they saw "rising entry-level wages as firms sought to attract and retain workers and as new minimum wage laws came into effect."
Prices grew at a modest to moderate pace in the majority of the Fed districts, the report said. While officials' contacts often said they were seeing higher transportation and material prices — and that tariffs were raising prices in a number of districts — several districts also noted that fuel prices had dropped.