Tariff pressures build as some firms begin passing costs to customers: Fed

Investing.com - The U.S. economy showed a modest improvement in recent weeks, but tariff-related cost pressures are increasingly filtering through corporate balance sheets, prompting some firms to pass higher costs to consumers.

"Overall economic activity increased at a slight to modest pace in eight of the twelve Federal Reserve Districts... marking an "improvement over the last three report cycles where a majority of Districts reported little change," the Fed said on Wednesday in its Beige Book economic report based on anecdotal information collected by the Fed’s 12 reserve banks through Jan.5.

The cautiously optimistic tone comes even as the job market remained largely stagnant, reflecting a “no hiring, no firing” environment that has persisted for months. Temporary hiring picked up, with one contact noting that it allows firms “to stay flexible in uncertain times.” Artificial intelligence’s current impact on employment remains limited, with “multiple contacts reporting that wage growth had returned to ‘normal’ levels,” the Fed said.

On the inflation front, "prices grew at a moderate rate across a large majority of Districts," but cost pressures from tariffs remain front and centre, with several contacts warning efforts to shield customers away from tariff-induced price hikes were waning as "pre-tariff inventories became depleted or as pressures to preserve margins grew more acute."

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