The US flag flies over shipping cranes and containers in Long Beach, California, as manufacturers express concerns including over higher costs due to tariffs, the Federal Reserve said (Mark RALSTON)

Washington (AFP) – Despite reporting solid growth in recent weeks, US manufacturers increasingly worry trade spats and other factors will dampen the outlook, the Federal Reserve said Wednesday.

At the same time, widespread worker shortages are hampering growth nationwide and throughout industries, and wage increases are becoming more widespread as companies compete to fill open positions, according to the Fed’s “beige book” survey of the economy.

But prices “continued to increase at a modest-to-moderate pace” as firms seeing higher input costs still cannot consistently pass them along to consumers, the report said.

The anecdotal reports are consistent with the outlooks offered by Fed officials as well as the International Monetary Fund and OECD, which have downgraded forecasts for US and global growth this year amid major trade frictions, Brexit and other factors.

“Manufacturing activity strengthened on balance but numerous manufacturing contacts conveyed concerns about weakening global demand, higher costs due to tariffs and ongoing trade policy uncertainty,” the Fed said in the report, prepared in advance of the monetary policy meeting March 19-20.

President Donald Trump’s aggressive trade policies included punishing tariffs on steel and aluminum as well as $250 billion in goods from China, which drew retaliation against US products.

And in spite of his goal to reduce the US trade imbalance, the US merchandise trade deficit soared last year to its highest level ever, while goods deficits with China, Mexico and the European Union hit records.

Many of the Fed’s 12 regional banks said manufacturing activity remains solid or increasing and the San Francisco Fed cited a steel manufacturer in Oregon that “noted strong activity in the industry due to lower competition from abroad arising from trade policy actions.”

– Jobs not college? –

But concerns in the industry were becoming more widespread than previous reports which for months have expressed concerns about the uncertainty caused by the trade friction.

The Cleveland Fed laid out “a number of factors that dragged down demand and weighed on the outlook for future growth,” which included “slower global growth — particularly in Europe and China,” as well as “continued uncertainty about the future of tariffs on steel and aluminum and ongoing US-China trade negotiations,” and “decreased consumer confidence.”

Meanwhile tight labor markets continue to serve as a brake on expansion throughout the United States, and that is obliging companies in many areas to raise wages and other benefits for low-skilled and high-skilled workers.

“Labor markets remained tight for all skill levels, including notable worker shortages for positions relating to information technology, manufacturing, trucking, restaurants and construction,” the report said. 

The St. Louis Fed noted falling enrollment in colleges “as potential students were increasingly choosing to enter the labor market” instead of pursuing higher education.

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