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Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years.
Similar experience undergirds our service in Ottawa, London, Brussels and in Asia.
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WASHINGTON (MaceNews) – The Federal Reserve’s latest “Beige Book” survey Wednesday of economic conditions in all 12 Fed Districts reflected widespread uncertainty because of shifting trade policy, softening consumer spending and worsening outlooks that hinted at an economy on the precipice of a downturn.
The following is the national summary and District-by-District snapshots from the Beige Book prepared by the Atlanta Fed:
Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports. Just five Districts saw slight growth, three Districts noted activity was relatively unchanged, and the remaining four Districts reported slight to modest declines. Non-auto consumer spending was lower overall; however, most Districts saw moderate to robust sales of vehicles and of some nondurables, generally attributed to a rush to purchase ahead of tariff-related price increases. Both leisure and business travel were down, on balance, and several Districts noted a decline in international visitors. Home sales rose somewhat, and many Districts continued to note low inventory levels. Commercial real estate (CRE) activity expanded slightly as multifamily propped up the industrial and office sectors. Loan demand was flat to modestly higher, on net. Several Districts saw a deterioration in demand for non-financial services. Transportation activity expanded modestly, on balance. Manufacturing was mixed, but two-thirds of Districts said activity was little changed or had declined. The energy sector experienced modest growth. Agricultural conditions were fairly stable across multiple Districts. Cuts to federal grants and subsidies along with declines in philanthropic donations caused gaps in services provided by many community organizations. The outlook in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose.
Employment was little changed to up slightly in most Districts, with one District reporting a modest increase, four reporting a slight increase, four reporting no change, and three reporting a slight decline. This is a slight deterioration from the previous report with a few more Districts reporting declines. Hiring was generally slower for consumer-facing firms than for business-to-business firms. The most notable declines in headcount were in government roles or roles at organizations receiving government funding. Several Districts reported that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions. In addition, there were scattered reports of firms preparing for layoffs. Most Districts and markets reported an improvement in overall labor availability, although there were some reports of constraints on labor supply resulting from shifting immigration policies in certain sectors and regions. Wages generally grew at a modest pace, as wage growth slowed from the previous report in multiple Districts.
Prices increased across Districts, with six characterizing price growth as modest and six characterizing it as moderate, similar to the previous report. Most Districts noted that firms expected elevated input cost growth resulting from tariffs. Many firms have already received notices from suppliers that costs would be increasing. Firms reported adding tariff surcharges or shortening pricing horizons to account for uncertain trade policy. Most businesses expected to pass through additional costs to customers. However, there were reports about margin compression amid increased costs, as demand remained tepid in some sectors, especially for consumer-facing firms.
Economic activity increased slightly, as the outlook became more pessimistic on tariff-related concerns. Prices rose modestly, but contacts perceived new upside risks to inflation. Employment edged up, although hiring plans became more cautious in response to increased uncertainty. IT services contacts experienced strong revenue growth and were expected to be relatively unaffected by tariffs.
Economic activity contracted modestly as heightened uncertainty weighed on businesses and consumers. Employment was steady to up slightly. Price increases picked up to the higher end of the moderate range. Businesses expressed significant concern about tariffs. Outlooks darkened, with many businesses anticipating declining activity and rising prices.
Business activity declined modestly during the current Beige Book period after a slight decrease in the last period. Nonmanufacturing activity fell moderately. Employment declined slightly; wages and prices again grew modestly. Generally, sentiment fell, and firms grew less optimistic about future growth amid rising economic uncertainty.
Reports suggested that Fourth District business activity continued to be flat in recent weeks, and contacts expected activity to remain flat in the months ahead. Consumer spending declined, though some auto dealers noted customers pulling forward purchases ahead of potential tariffs. Employment levels increased slightly, and wage pressures remained moderate.
The regional economy grew slightly in recent weeks despite some pockets of weakness tied to federal staffing and contract spending. Consumer spending was flat. Residential and commercial real estate activity picked up slightly. Non-financial service providers reported a modest decline in demand and hesitation from customers to make investment decisions. Employment was little changed and price growth remained moderate amid upward price pressures from tariffs.
The Sixth District economy grew slightly. Employment was flat. Wages, nonlabor costs, and firms’ prices increased modestly. Retail sales fell slightly, and travel and tourism declined modestly. Home sales rose modestly. Commercial real estate conditions softened. Transportation activity grew slowly. Loan growth was moderate. Manufacturing declined. Energy activity rose slowly.
Economic activity was little changed. Consumer spending increased modestly; employment and construction and real estate activity were up slightly; manufacturing was flat; business spending declined slightly; and nonbusiness contacts saw a slight decline in activity. Prices increased modestly, wages rose slightly, and financial conditions tightened. Prospects for 2025 farm income were unchanged.
Economic activity has remained unchanged, but the outlook has slightly deteriorated. Heavy rains negatively impacted neighborhoods, farms, and businesses. Contacts expressed a lot of uncertainty and an elevated effort in estimating the impact of tariffs and ways to reduce cost increases and supply disruptions.
District economic activity was lower. Employment declined and labor demand continued to soften. Wage growth was modest, and price increases were moderate. Consumer spending was lower with some exceptions. Manufacturing experienced modest improvements. Construction activity fell overall. Commercial real estate was mostly unchanged, and home sales declined. Agricultural conditions remained weak.
Economic activity in the Tenth District grew slightly, but expectations about business activity and consumer spending weakened considerably. Amid shifting conditions, businesses indicated they were most likely to adjust pricing to adapt. Expectations of price growth rose at a robust rate, most pronounced in goods sectors. Employment levels were stable but hiring stalled.
Growth in the Eleventh District economy slowed to a slight pace. Nonfinancial services activity stalled. Retail sales dipped while manufacturing and oil field activity rose modestly. Lending growth moderated. Commercial real estate activity was steady, while housing demand remained tepid. Employment increased, and input cost pressures accelerated. Outlooks deteriorated as heightened uncertainty surrounding domestic and trade policy hindered firms’ ability to plan.
Economic activity slowed slightly. Employment fell slightly. Wages grew slightly, and prices rose modestly. Demand for business and consumer services and for retail goods weakened. Activity in manufacturing and residential and commercial real estate markets softened slightly. Lending activity and conditions in agriculture were stable. The economic outlook worsened materially.
By Max Sato
In its monthly report for April released Friday by the Cabinet Office, the government said the economy is “recovering at a moderate pace but confronted by the uncertainty arising from the U.S. trade policy.”
The previous seven statements said the economy was “recovering at a moderate pace, although there are some areas where it is pausing.” That wording was adopted in August, when it upgraded its view, citing the effects of wage hikes in fiscal 2024 ending March 2025 and temporary income tax credits.
Wage hikes announced by major firms for fiscal 2025 are 5.37% in the weighted average and the highest rate in 34 years (base wages are up 3.79%), Japanese Trade Union Confederation (RENGO) said Thursday. That is up from 5.20% tallied about a year ago, which was a 33-year high (base wages growth was 3.57%).
The government is counting on smaller firms to follow in the footsteps of large corporations like Toyota Motor and the retail giant AEON, which in turn should support consumer spending and corporate earnings, leading to higher wage growth. The Bank of Japan is also hoping to see that kind of “virtuous cycle,” the key to generating stable inflation backed by demand, not driven by higher costs.
Looking ahead, “the improvement in the employment and income conditions and the effects of various (fiscal) policies are expected to support a moderate recovery while the impact of the U.S. trade policy is raising downturn risks to growth.” Among the stimulus measures are utility subsidies aimed at helping lower electricity and natural gas bills during the winter heating season from January to March (bills are paid from February to April). The government has also been providing cash handouts to low-income families.
“In addition, the effects of continued price increases on private consumption
through a downturn in consumer sentiment are also downside risks to the Japanese economy,” it warned.
Last month, it said “the economy is expected to continue recovering at a moderate pace with the improving employment and income conditions, supported by the effects of various policies.” It also warned against downside risks arising from “the effect of continued price increases on private consumption through a downturn in consumer sentiment and the impact of the U.S. trade policy.”
The Bank of Japan’s quarterly Tankan business survey released on April 1 showed confidence among major manufacturers slipped in the March quarter, posting its first decline in four quarters, in the face of stiff tariffs on U.S. imports of metals as well as President Trump’s plans to slap “reciprocal tariffs” on imports from global trading partners. China’s struggling recovery from its property market problems is also seen putting a damper on corporate sentiment.
Sentiment among non-manufacturers was either slightly firmer or unchanged. Large hotels and restaurants benefited from the flux of visitors from overseas who continued taking advantage of the weak yen. Record snowfall in many regions also boosted demand for winter clothing and heaters, which in turn propped up the retail chains.
The government repeated the need to keep a close watch on “fluctuations in the financial and capital markets.” The yen has firmed further to Y142 to the dollar, shedding most of its losses incurred in the second half of 2024. Last month, it had appreciated to around Y149.50 from Y158 in January. The U.S. Federal Reserve remains cautious about cutting interest rates amid sticky services costs and stiff tariffs, which are set to boost import cots and thus overall inflation. The BOJ is expected to continue raising interest rates but only gradually.
The government vowed to “take all possible measures” to cushion the impact of the Trump tariffs. Tokyo sent Economic Revitalization Minister Ryosei Akazawa to Washington this week for talks with U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer.
Last week, President Trump announced a 90-day pause on the latest series of import duties, which put Japan’s 24% across-the-board on hold, but the 10% baseline tariff and a 25% tariff on automobiles, auto parts, steel and aluminum exports to the U.S. are kept in place.
In the April report, the Japanese government estimates that the U.S. tariffs will have a direct impact on mostly manufacturers whose production accounts for about 20% of the gross domestic product. “It is important to keep running the virtuous cycle of higher wages to higher prices involving mostly non-manufacturers that account for 80% (of Japan’s GDP),” it said.
The government repeated that with the Bank of Japan it “will continue to work closely together to conduct flexible policy management in response to economic and price developments.” It expects the BOJ “to achieve the price stability target of 2% in a sustainable and stable manner, while confirming the virtuous cycle between wages and prices, by conducting appropriate monetary policy in light of economic activity, prices and financial conditions.”
The government continues to view the Chinese economy as “pausing” even though there is an increase in supply thanks to the effects of policy measures. It regards the U.S. economy as “expanding” but also warned that its trade policy is generating “uncertainty.” Eurozone is “picking up” and Germany is struggling. It downgraded its view on India for the first time in 47 months, saying “the pace of economic growth is slowing.” Previously, it had said “the pickup is pausing.”
Key points from the monthly report:
The official view on business sentiment was revised down for the first time in 37 months. It is now “largely flat,” instead of “improving.” The Tankan survey showed the index for confidence among major manufacturers slipped to 12 in the March quarter from 14 in December, posting its first decline in four quarters.
The government maintained its core assessment of private consumption that is “picking up” but changed its wording for the key component that accounts for about 55% of the GDP, saying “the pickup in private consumption is backed by employment and income conditions, although consumer sentiment is in a weak tone.” That was the first change in eight months. Previously, consumption was “picking up while weakness remains in some areas.”
Real household spending posted its first year-on-year drop in three months (the 8th in 12) in February but the decrease was only slight at -0.5%, and it would have risen 1.8% if the boosting impact of the lunar new year in February 2024 were excluded. It was much firmer than the median forecast of a 3.4% slump and followed a slowdown to +0.8% in January from +2.7% in December.
The decline was mainly caused by the volatile factor of home repairs/maintenance, and also in reaction to higher medical and dental bills paid a year earlier. Consumers slashed purchases of vegetables and fruits amid rising costs and shied away from buying appliances that were not in an urgent need for replacement. Real wage growth is falling behind inflation again, keeping households frugal.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, also fell 0.8% on the year after dipping at the same rate the previous month, when overall spending edged up 0.8%.
The government maintained its view on industrial production, which has been “flat.”
Production posted its first rise in four months in February, up 2.3% (revised down from 2.5%), driven by solid demand for equipment for producing semiconductors and flat panel displays as well as that for computer chips. METI’s survey of producers indicated that output would edge up 0.6% in March (a rare case of the same figure after adjustment for the index’s upward bias), led by a continued rise in the output of production machinery, before being nearly flat (+0.1%) in April.
The government kept its assessment of exports after upgrading it for the first time in 18 months in February, saying they are “showing signs of a pickup.”
Japanese export values posted the sixth straight year-on-year rise in March, up 3.9%, after rising 11.4% in February. The increase was led by continued solid demand for automobiles and semiconductor-producing equipment (non-ferrous metals also up) ahead of the Trump administration’s April 2 announcement of “reciprocal” tariffs on imports from many trading partners. Shipments of iron and steel fell, hit by the U.S. tariffs on metals that took effect in mid-March. Mineral fuel exports also dipped.
Other details:
The government’s assessment of key components of the economy in the monthly economic report:
“The pickup in private consumption is backed by employment and income conditions, although consumer sentiment is in a weak tone” vs. private consumption is “picking up while weakness remains in some areas” (wording changed for the first time in eight months; upgraded in August 2024; downgraded in February 2024).
Business investment is “showing signs of a pickup” (unchanged; upgraded in March 2024; downgraded in November 2023).
Housing construction is “largely flat” (unchanged; upgraded in August 2024’ downgraded in September 2023).
Public investment is “resilient” (unchanged; upgraded in July 2024; downgraded in October 2024).
Exports are “showing signs of a pickup” (unchanged; upgraded in February 2025; downgraded in July 2024).
Imports are “largely flat” (unchanged; upgraded Oct 2024; downgraded in February 2025).
Industrial production is “flat” (unchanged; upgraded in May 2024; downgraded in Oct 2024).
Corporate profits are “improving” vs. “improving as a whole but its pace is moderate” (the first upgrade in 18 months; last upgraded in September 2023; downgraded in December 2024).
Business sentiment is “largely flat” vs. “improving” (the first downgrade in 37 months; upgraded in December 2023; last downgraded in March 2022).
The pace of increase in bankruptcies is “largely flat” (unchanged; upgraded in January 2025; downgraded in January 2023).
Employment conditions are “showing signs of improvement” (unchanged; upgraded in June 2023; downgraded in May 2020).
Domestic corporate goods prices are “rising gradually” (unchanged; last changed in September 2024).
Consumer prices are “rising” (unchanged: last changed in January 2024).
–Governor Macklem: To Remain Less Forward-Looking Than Usual ‘Until Situation Is Clearer’
–Mackem: Prepared to Act ‘Decisively’ If Information Points Clearly in One Direction
–Macklem: Governing Council Discussed Both Holding Rates Steady and Cutting by 25 Basis Points as in March
–Senior Deputy Governor Rogers: Some Are More Optimist about Trade Rows Being Resolved but There Is ‘Clear Consensus’ to Hold Rates
By Max Sato
(MaceNews) – The Bank of Canada on Wednesday maintained its policy interest rate – the target for overnight lending rates – at 2.75% as largely expected after seven straight rate cuts through March amid exceptionally high uncertainty over growth and inflation sparked by protectionist U.S. trade policy.
BOC officials remain cautious about predicting their next move, blaming the highly unpredictable nature of what President Donald Trump decides. The impacts of those decisions have already triggered “an unprecedented shock” unseen for more than 100 years, according to the governor.
The latest decision follows moderate 25-basis point rate cuts, in March and January, two consecutive 50-basis point slashes, in December and October, and three 25-basis point cuts since June when the bank began unwinding the effects of its past aggressive tightening.
“Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs,” the bank said in a statement. “Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled.”
“In March we said we would be less forward-looking and we would be proceeding carefully with further changes in our policy rate,” Governor Tiff Macklem told a news conference. “A lot has happened in the last five weeks since our March policy decision but the situation is no clearer: The tariffs have been announced, they’ve been imposed, they’ve been retracted and they’ve been threatened again.”
Macklem didn’t directly answer the question of whether it was a close call to hold rates on Wednesday but said, “We did much like we did last time.” One option was to leave the policy rate at 2.75% and the second one was to cut the rate by 25 basis points.
Senior Deputy Governor Carolyn Rogers told reporters that some members were more optimistic about how soon the trade conflicts would be resolved but stressed that there was “clear consensus” to hold.
Rogers was also asked about financial stability as the liquidity in the financial markets was slightly constrained for a while and yield spreads widened. “The market has absorbed a pretty big shift (in the U.S. trade policy) without a big dislocation,” she said.
Canadian financial institutions “are well capitalized” and “have some room to absorb this kind of volatility,” Rogers said but added: “We are definitely watching for signs that the short-term volatility starts to affect stability.”
In a nutshell, Macklem’s key message is: “We are navigating carefully. Our goal is to ensure that Canadians stay confident in price stability.”He also said another key message is: “We are going to do as much as we can to support the economy while maintaining our primary focus on price stability.”
Asked how to balance between the two goals, the governor said, “Our target is 2% inflation. We think about that symmetrically. We are just as worried about inflation above 2% as below 2%.”
While being less forward-looking than usual “until the situation is clearer,” the governor noted that “it also means we are prepared to act decisively if incoming information points clearly in one direction.”
Asked whether “acting decisively” means lowering interest rates by 50 basis points at a time or making policy decisions between the scheduled meetings, Macklem said, “I would not over-rotate on the word ‘decisively.’ It’s not a code word or anything. The outlook is really cloudy now, so we are less forward-looking than normal. We are navigating carefully.”
“We are in a period of very elevated uncertainty. If that clears, we can be more forward-looking again and certainly if the data is titling in one direction than the other, we can respond decisively,” he said without specifying what can be a decisive move.
If there are significant tariffs, there will be cost increases; the prices of many goods will go up, the governor said. “There is nothing we could do about that. What we are focused on is making sure that those first round price increases from the cost increases don’t spread to other prices and become ongoing inflation.”
In its quarterly Monetary Policy Report, the bank presented two illustrative scenarios for how U.S. trade policy could unfold, instead of focusing on a single, highly uncertain projection.
In Scenario 1, bank officials assume most of the new tariffs get negotiated away, but the process is unpredictable, and businesses and households remain cautious. GDP growth in this scenario stalls in the second quarter, then expands only moderately. Inflation drops below the 2% target for the rest of 2025 and into 2026, both because of the end of the consumer carbon tax and a weak economy.
In Scenario 2, they assume a long-lasting global trade war. The economic consequences are severe. Canada’s GDP contracts in the second quarter and the economy is in recession for a year. Growth gradually returns in 2026 but remains soft through 2027 as U.S. tariffs permanently reduce Canada’s potential output and lower our standard of living. Inflation rises above 3% in mid-2026 as tariffs, countermeasures and shifts in supply chains raise costs, pushing up many prices. Inflation then eases as weak demand limits ongoing inflationary pressures.
The only forecast provided is for the “very near-term” outlook for inflation: Total CPI inflation is expected to be about 1.5% in April, down from 2.3% in March. The elimination of the consumer carbon tax on April 1 will reduce CPI inflation by about 0.7 percentage points for one year. Lower global oil prices will also pull inflation down. The higher inflation in the last couple of months reflects some rebound in goods price inflation and the end of the temporary suspension of sales taxes.
So, what is the most likely scenario for the coming months? There are no clear projections from private-sector economists, either, as to roughly when the BOC may opt to cut rates.
“There’s not much sense parsing every word from the bank when the economic landscape can shift so abruptly in coming weeks, and the bank—like the rest of us—will be reacting and responding to those shifts,” BMO Chief Economist Douglas Porter wrote in a report.
“We believe that the deep trade uncertainty will weigh heavily on growth in Q2 and Q3, blunting inflation pressures, and eventually prompting the bank to trim rates further, ultimately taking them slightly below neutral—which would be entirely appropriate in a world of trade trauma.”
The bank has delivered a total 225 basis points (2.25 percentage points) in the current easing cycle. Previously, it raised the policy rate by a total of 475 basis points between March 2022 and July 2023, jacking up the key rate through 10 increases from its record low of 0.25% to a 22-year high of 5.0%.
–ISM Manufacturing Index at 49.0 Vs. 50.3 in February, Below Consensus (49.6)–ISM’s Fiore: Activity ‘Overshadowed’ by US Import Tariffs; So Many Unknowns, More Confusion–Fiore: Still
By Max Sato (MaceNews) – The Bank of Japan’s quarterly Tankan business survey is forecast to show confidence among manufacturers slipped in the March quarter
– May Have To Leave Rates Unchanged Longer Or Hike Rates If Inflation Worsens By Steven K. Beckner (MaceNews) – Although downside risks to the
– Powell: ‘Not in Any Hurry to Move,’ ‘Well Positioned to Wait For Clarity’ – SEP Retains December Dots While Forecasting More Inflation, Less GDP
WASHINGTON (MaceNews): The Federal Ope Market Committee Wednesday provided no surprises in its latest policy statement and the dot plot of participants still saw two
By Max Sato (MaceNews) – Japan’s government maintained its cautiously optimistic assessment for the seventh straight month, saying the economy is expected to stay on
–US Equity Allocation Sees Biggest Monthly Drop on Record By Vicki Schmelzer NEW YORK (MaceNews) – A drop in expectations that the U.S. economy will
By Max Sato (MaceNews) – Canada’s new Prime Minister Mark Carney, who was sworn in Friday, vowed to protect his country from the threat of
Contact Mace News President
Tony Mace tony@macenews.com
to find a customer- and markets-oriented brand of news coverage with a level of individualized service unique to the industry. A market participant told us he believes he has his own White House correspondent as Mace News provides breaking news and/or audio feeds, stories, savvy analysis, photos and headlines delivered how you want them. And more. And this is important because you won’t get it anywhere else. That’s MICRONEWS. We know how important to you are the short advisories on what’s coming up, whether briefings, statements, unexpected changes in schedules and calendars and anything else that piques our interest.
No matter the area being covered, the reporter is always only a telephone call or message away. We check with you frequently to see how we can improve. Have a question, need to be briefed via video or audio-only on a topic’s state of play, keep us on speed dial. See the list of interest areas we cover elsewhere
on this site.
—
You can have two weeks reduced price no-obligation trial for $199. No self-renewing contracts. Suspend, renew coverage at any time. Stay with a topic like trade while its hot and suspend coverage or switch coverage areas when it’s not. We serve customers one by one 24/7.
—
Tony Mace was the top editorial executive for Market News International for two decades.
Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years.
Similar experience undergirds our service in Ottawa, London, Brussels and in Asia.