Businesses around the country are increasingly worried about the looming fiscal cliff, the Federal Reserve said Wednesday in its Beige Book survey of regional economies.
While consumer spending has picked up pace in recent weeks, manufacturing has fallen off, the Fed said, with business owners expressing worries about the sharp tax hikes and spending cuts that could hit them if Washington cannot agree on new legislation to avert the cliff.
The Fed said that nine of its 12 districts reported modest or better economic growth in the weeks since its October 10 report.
The New York region was weaker due to disruptions from the superstorm Sandy that shut the city and surrounding areas down at the end of October, Growth was also weaker in the Boston and Philadelphia regions, both affected to a lesser extent by Sandy.
Consumer spending grew moderately across most districts, according to the survey, and the real estate sector gained in a majority of regions.
Other industries were mixed from area to area, with the storm that raked the East Coast and smashed inland in New Jersey on October 29 benefiting growth some areas even as it shut down the economy in those directly affected.
Employment increased as well in more than half the districts, with wages growing only modestly, "constrained in part by an abundant labor supply," the Fed said.
But manufacturing was generally weaker, with some districts reporting an outright contraction in the sector, citing the slower global economy.
Across most of the regions, businesses surveyed expressed increasing worries about the looming deficit-slashing policies of the cliff, which will hit from January 1 if Democrats and Republicans in Washington cannot negotiate a less harsh plan for reducing the deficit.
Manufacturers in five districts said they were worried about the economy in 2013 "in part due to the uncertainty regarding the outcome of the fiscal cliff," the report said.
"Many of our contacts are expecting a slight weakening in business activity during the next few months due to seasonal factors and uncertainty surrounding the outcome of the fiscal cliff," the Fed's Cleveland regional branch reported.
In Boston, information technology businesses were increasingly concerned about the cliff and Europe; likewise, local real estate businesses reported a fall in leasing enquiries due to concerns about the cliff.
In the Chicago region, builders said customers were holding off on new orders as well for the resolution of the cliff talks in Washington.
Another frequent worry was the global economic slowdown and the impact of that on both business orders and the investment climate.
"A significant global manufacturer reported that growth in the US and worldwide is weak and continues to slow; this firm and another large exporter specifically reported that growth in China is slowing further," the Fed's Philadelphia region reported.