US firms point to steady economy but see lower profit margins, Fed says

• U.S. economic activity was little changed from September through early October. Additionally, firms saw a slight uptick in hiring, continuing recent trends that have reinforced expectations the Federal Reserve will opt for a smaller 25-basis-point reduction in borrowing costs in two weeks.
• The U.S. central bank's latest temperature check on the economy’s health showed that inflation pressures continued to moderate. Moreover, input prices generally rose faster than selling prices, denting firms' profit margins.
• Inflation and the broader economy remain a key issue among voters ahead of the Nov. 5^th U.S. presidential election. A string of stronger-than-expected economic data and inflation, consumer spending and job gains has caused investors to dial back bets on the pace and extent of rate cuts.
• The resilient economy has been underpinned by firm income growth and ample household savings. Though labour market momentum has slowed, the level of layoffs remains historically low, supporting wage gains. U.S. job gains increased by the most in six months in September and the unemployment rate fell to 4.1%, while retail sales increased solidly last month.
• The steadiness of the labour market was reflected in the latest survey, with more districts than in the prior survey reporting slight-to-moderate growth. Demand for workers, however, eased somewhat. A source at a Minnesota supply company told the Minneapolis Fed "I about fell out of my chair" at the interest it received for a high-skill driving position it had previously struggled to fill.
• However, there were few signs of outright deterioration, with layoffs remaining limited. The San Francisco Fed noted that some employers had begun hiring for open positions that had been on hold for the past year, while wages across Fed districts "generally continued to rise at a modest to moderate pace."

(Source: Reuters)