US Firms Grow More Pessimistic on Economic Outlook

• U.S. economic activity continued to expand from early April through mid-May but firms grew more downbeat about the future amid weakening consumer demand while inflation continued to increase modestly. These are the findings a U.S. Federal Reserve survey showed on Wednesday, as central bankers mull how long they will need to keep interest rates at current levels.
• The U.S. central bank's latest economic temperature check also showed that the jobs market normalises gradually. According to the Dallas Fed, waning consumer demand was an ongoing concern for many firms. The continued Middle East conflict and geopolitical tensions across the world were also cited as downside risks.
• Contacts in most Fed districts noted consumer pushback against additional price increases. One large clothing retailer told the Boston Fed it planned to implement "modest price reductions on selected items in early fall in a bid to boost sales." However, there are also some signs inflation pressures may be reaccelerating. "Many districts observed a continued increase in input costs," the report said.
• "Consumers are becoming more price-conscious, likely putting pressure on profit margins. We should expect more discounts and incentives as some consumers struggle with persistently high prices," said Jeffrey Roach, chief economist at LPL Financial following the report's release.

 (Source: Reuters)