By Ann Saphir
(Reuters) -U.S. economic activity has risen slightly but unevenly since mid-January, employment nudged higher, and prices increased modestly, the Federal Reserve said on Wednesday, with businesses and households expressing continued optimism amid rising uncertainty about how U.S. President Donald Trump's policies will affect future growth, labor demand and prices.
"Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions," the U.S. central bank said in its summary of observations from the commercial and community contacts of each of the Fed's 12 regional banks. "Overall expectations for economic activity over the coming months were slightly optimistic."
Known collectively as the "Beige Book," the document provides a snapshot of the nation's economic experience and mood two weeks ahead of each Fed policy meeting. Compared with January, it reflected growing anxiety among businesses across most districts about how Trump's plans to increase import duties and restrict immigration could affect demand and prices.
The report included 47 mentions of uncertainty, up from 17 in the January report, and 49 mentions of tariffs, up from 23 in January and 11 in December. Contacts in multiple Fed districts also said rising uncertainty over immigration and other matters was influencing current and future labor demand, the report said.
With all its data collection complete by February 24, it may already be stale.
Trump on Tuesday imposed 25% tariffs on most imports from Mexico and Canada, and doubled tariffs on Chinese goods to 20%, actions that many investors and analysts said went far beyond what they expected. Canada and China immediately retaliated with new import taxes on U.S. goods, and Mexican President Claudia Sheinbaum promised her own response this weekend.
Although the White House on Wednesday said autos coming in through the U.S.-Mexico-Canada trade agreement would be exempt from the tariffs for a month, some Wall Street economists say the new levies augur stronger inflation and slower growth, a combination that could give the Fed a difficult policy choice.
That challenging mix is already evident in surveys showing rising consumer inflation expectations, slowing business activity, a drop in new factory orders and an increase in prices paid for manufacturing materials.
"Consumer spending was down," the Cleveland Fed said in observations dovetailing with national consumer sentiment surveys, "and some auto dealers and consumer lenders noted declining consumer confidence related to policy uncertainty and inflation."