Cleveland Fed: Businesses report increasing prices, declining activity
Businesses in Ohio and surrounding states are seeing rising prices and declining activity in several sectors, the Federal Reserve Bank of Cleveland reported late last month. Some of that is attributable to massive import taxes imposed by President Donald Trump, the businesses said.
One of 12 regional federal banks, the Cleveland Fed covers all of Ohio as well as parts of Pennsylvania, West Virginia and Kentucky.
It conducts a survey of businesses and community leaders for use by the Federal Open Market Committee as it sets policies influencing interest rates and other matters.
The Cleveland Fed survey published most recently indicates that Trump’s tariffs continue to be a drag on the economy.
According to the Atlantic Council’s tariff tracker, Trump has imposed import taxes ranging from 10% to 60% on just about every country in the world — with the notable exception of Russia.
The Cleveland Fed’s Survey of Regional Conditions and Expectations, or SOURCE, which found a big jump in the percentage of businesses that expect to cut staff in the coming year.
“The share of respondents who expected their firms to decrease employment levels in the next 12 months more than doubled between November 2024 (7%) and November 2025 (18%),” it said of the survey, which was conducted in late October and early November.
However, the report pointed out, less than a fifth of businesses expect to cut staff while 51% expect to maintain it at current levels, and 32% expect to add employees.
The Cleveland Fed produces a second report — the Beige Book — based on the SORCE survey and other inputs.
The most recent addition indicates that the Trump import taxes are helping to drive inflation.
“Overall, nonlabor input costs increased at a robust pace in recent weeks, continuing the trend seen over the past four reporting periods,” it said.
“Manufacturers reported tariff-related cost increases for equipment and materials, and one observed that most manufacturers had run out of lower-cost pre-tariff inventory. One large retailer’s average costs had increased around 20 percent year-over-year because of tariffs, and it was trying to determine how it would distribute these increases.”
Tariffs weren’t the sole driver of inflation, the report said.
“By contrast, another large retailer did not anticipate further cost increases, stating that tariff impacts had stabilized,” it said.
“Outside of tariffs, many contacts continued to report rising utilities and insurance costs. In general, nonlabor costs were expected to grow at a strong pace in the coming months.”
The Beige Book added that demand for manufactured goods was down slightly, but that it was being propped up by the rapid development of data centers.
“Although multiple contacts continued to report strong demand related to rapidly expanding AI data center construction, some described a ‘collective holding of breath’ as these fast-paced buildouts became a primary driver of demand even as other industry segments remained weak,” it said.
“Multiple contacts added that demand from data centers was not enough to offset softer activity in other industries. Still, manufacturers generally expected demand to increase slightly in the coming months.”
As the wealthiest Americans grow ever richer — and see their taxes cut — their low and middle-income neighbors are seeing skyrocketing health, grocery and utility costs without commensurate increases in pay. It’s a phenomenon that some economists are calling the K-shaped economy.
Retailers who gave input for the Beige Book reported seeing aspects of it in their stores.
“Consumer spending was flat in recent weeks, and contacts expected demand to decline modestly in the coming months,” the report said.
“Among retailers reporting flat sales, one noted continued pressure on lower-income consumers and early signs of strain on middle-income consumers, while a higher-end grocery store observed price-conscious behavior among customers.”
Adding to the pain was Trump’s decision to — unlike previous administrations — disrupt federal food benefits during the partial government shutdown.
The move created record demand and many Ohio food pantries, while the shutdown itself meant that federal workers went weeks without a paycheck.
“Several contacts connected changes in consumer spending to federal policies,” the Beige Book said.
“A grocery store reported a decline in sales, citing the pause in (federal food subsidies) alongside a general pullback in spending due to economic concerns. A food and hospitality contact reported that customers, many of whom are federal workers, were spending cautiously.”
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