Trade jitters weighing on US business investment: Federal Reserve

[WASHINGTON] President Donald Trump's trade wars have many US businesses on edge, prompting some to delay or cut back on planned investments, the Federal Reserve reported Wednesday.

In half the country, meanwhile, a tightening labour shortage is also cutting into sales and causing some companies to delay projects, according to the Fed's latest "beige book" survey of the economy, which said inflation continued to mount.

The world's largest economy grew at a "moderate pace" in the June-July period but growth was "below average" in the St. Louis and Kansas City regions, according the report, while manufacturing slowed in the district around Richmond, Virginia.

The Fed is widely expected to raise interest rates at its next meeting in two weeks to keep a lid on growing inflation amid brisk US economic expansion, steady job gains and historically low unemployment - a policy that has drawn sharp rebukes from Mr Trump.

"Businesses generally remained optimistic about the near-term outlook, though most districts noted concern and uncertainty about trade tensions - particularly though not only among manufacturers," said the report, which gathers accounts from local contacts nationwide.

"A number of districts noted that such concerns had prompted businesses to scale back or postpone capital investment."

WORRIED INDIANA, MISSOURI FARMERS

The report said "six of the 12 districts" pointed to instances where the lack of available workers was eating into sales caused employers to delay projects.

"Wage growth was mostly characterised as modest or moderate."

Survey respondents said Mr Trump's trade wars had driven up prices for manufacturers and others, which companies planned to begin passing onto consumers, while also causing prices for key commodities like soy beans to plummet.

Farmers were particularly worried in the St. Louis region.

"Farmers continued to express concerns over low agricultural commodity prices resulting from the trade dispute between China and the United States," according to the report.

"Contacts in Missouri and Indiana indicated that farmers did not lock in pre-tariff pricing for a majority of their soy bean crop, leaving them exposed to current market conditions."

China, the largest purchaser of US soy exports, slapped stinging retaliatory tariffs on American exports of the crop, counterpunching against Mr Trump's tariffs on US$50 billion in Chinese-made industrial and technological goods that Washington says have benefited from theft of intellectual property, subsidies and state intervention.

Farmers, retailers and manufacturers have mounted an increasingly robust lobbying campaign against Trump's trade wars, vowing a full-court press against them in advance of November's hard-fought midterm elections.

Word of businesses holding up investment helped send Wall Street lower following a midday rally, with stocks ending near flat in New York.

AFP