US businesses hammered by COVID-19 pandemic but some feel worst of crisis behind them: Fed survey

The Fed’s survey, known as the “Beige Book,” was conducted in April, when non-essential businesses were shut down in much of the country, through 18 May, when some states had started to loosen restrictions.

Reuters May 28, 2020 10:18:38 IST
US businesses hammered by COVID-19 pandemic but some feel worst of crisis behind them: Fed survey

US businesses continued to be slammed by the effects of the novel coronavirus epidemic into the middle of May, a Federal Reserve report showed on Wednesday, and few expected a swift recovery despite some signs of hope.

The sharp plunge in economic activity recounted in the US central bank’s latest temperature check of business activity across its 12 districts shed light on the depth of the economic pain generated by the virus, which has led to an unprecedented downturn and a US death toll approaching 100,000.

The Fed’s survey, known as the “Beige Book,” was conducted in April, when non-essential businesses were shut down in much of the country, through 18 May, when some states had started to loosen restrictions.

“Economic activity declined in all districts – falling sharply in most,” the Fed said in its report. “Although many contacts expressed hope that overall activity would pick up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery.”

The Fed has acted aggressively to bolster the economy to try to mitigate the effects of the widespread business closures and a surge in job losses. The central bank cut its key overnight interest rate to near zero in March, launched a round of open-ended asset purchases and announced a slate of emergency lending tools to support businesses and households.

Congress has also passed nearly $3 trillion in economic relief to funnel funds to individuals and businesses hurt by the pandemic. But uncertainty remains about how scarred businesses will be, despite an easing in lockdown restrictions.

Still hurting

The collection of anecdotes from the Fed’s districts showed a number of firms felt the worst of the crisis was behind them, and the hard-hit New York district said there were scattered reports of a nascent pickup in economic activity in early May.

In the Minneapolis Fed district, some hotels in Montana and other areas dependent on tourism reported improvements in reservations toward the end of June and into July.

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But the snapshot of the nation’s economic health also made clear most businesses were still grappling with the fallout, even with an easing of restrictions.

“We are at the beginning ... and I would expect that process to be something that plays out over the next 120 days. There will be a learning process there by different businesses that keeps customers confident and keeps their own workforce confident.”

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Regaining the trust of customers fearful they could expose themselves to the virus while out spending was a key concern, the Fed’s report showed.

“Contacts are uncertain how fearful consumers will be while the COVID-19 threat remains and how freely consumers will spend after the threat lifts,” the Fed’s contacts in the Philadelphia district noted, referring to the respiratory disease caused by the novel coronavirus.

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