Research >> Economics
Beige Book: Economic Activity contracted sharply and abruptly due to COVID-19 pandemic
Economic activity contracted sharply and abruptly across all regions in the United States as a result of the COVID-19 pandemic. The hardest-hit industries—because of social distancing measures and mandated closures—were leisure and hospitality, and retail aside from essential goods. Most Districts reported declines in manufacturing, but cited significant variation across industries. Producers of food and medical products reported strong demand but faced both production delays, due to infection-prevention measures, and supply chain disruptions. Some other manufacturing industries, such as autos, mostly shut down. The energy sector, suffering from low prices, reduced investment and output. Districts reporting on loan demand said it was high, both from companies accessing credit lines and from households refinancing mortgages. All Districts reported highly uncertain outlooks among business contacts, with most expecting conditions to worsen in the next several months.
Employment and Wages
Employment declined in all Districts, steeply in many cases, as the COVID-19 pandemic affected firms in many sectors. Employment cuts were most severe in the retail and leisure and hospitality sectors, where most Districts reported widespread mandatory closures and steep falloffs in demand. Many Districts said severe job cuts were widespread, including the manufacturing and energy sectors. Contacts in several Districts noted they were cutting employment via temporary layoffs and furloughs that they hoped to reverse once business activity resumes. The near-term outlook was for more job cuts in coming months. No District reported upward wage pressures. Most cited general wage softening and salary cuts except for high-demand sectors such as grocery stores that were awarding temporary "hardship" or "appreciation" pay increases.
The general direction of price inflation was down for both selling prices and non-labor input prices, as Districts reported either slowing price growth, flat prices, or modest to moderate declines in prices on balance. These trends were seen as reflecting weaker demand for many goods and services in the wake of the COVID-19 pandemic. Four Districts also reported further declines in energy prices. In contrast, supply chain disruptions and shifts in the composition of demand led to significant price increases for some essential services—such as freight—and some agricultural commodities and consumer goods. While expectations concerning agriculture prices were mixed, the outlook calls for further downward pressure on prices on average.
Highlights by Federal Reserve District
Economic activity slowed markedly in March, except among manufacturing firms in the region whose products saw increased demand because of the pandemic. Retailers and tourism contacts cited dramatic fall-offs in demand and they laid off customer-facing workers. Soft-ware and IT services firms continued to see strong demand, but few new customers. Real estate activity in the region paused in March.
The regional economy deteriorated sharply since the last report, with many companies implementing partial temporary shutdowns and widespread staff reductions, and some reducing wages. Selling prices were flat to down modestly. The leisure & hospitality and retail sectors were particularly hard hit, while the wholesale trade and information sectors showed more resilience. Financial firms reported weaker activity.
Business activity fell severely during the current Beige Book period, as the COVID-19 pandemic gripped the mid-Atlantic. No sector was spared. Rapidly rising joblessness has not made hiring easier, as contagion fears and child care needs keep workers at home. Prices tend to be falling, but the wage path is muddied, and firm out-looks are clouded by uncertainty.
Economic conditions deteriorated rapidly in the second half of March as COVID-19 mitigation efforts curbed demand across a wide array of industries. In response, firms sought to conserve cash by cutting staff and capital spending. Looking forward, business contacts generally expected conditions to worsen further in coming months.
The Fifth District economy contracted as negative effects of the coronavirus outbreak were reported across most segments of the economy, leading to many businesses to scale back operations and employment. The few positive reports mainly came from producers and transporters of essential supplies. Overall, employment declined sharply and price growth remained muted.
Economic activity declined, and the labor market deteriorated due to COVID-19. Non-labor costs remained stable. Retail sales for non-discretionary products grew as sales of non-essential items fell. Tourism and hospitality contacts reported significant declines in activity. Housing activity softened, and commercial real estate decelerated. Manufacturing declined, but new orders held steady. Banking activity was mixed.
Economic activity declined, but the intensity of decline varied by industry. Consumer spending decreased sharply; business spending, construction and real estate activity, and manufacturing production decreased moderately. Retail and hospitality payrolls plunged. Wages edged up and prices were little changed. Financial conditions deteriorated substantially, as did prospects for agricultural income.
Economic activity has declined sharply since February. Many firms reported moderate to severe temporary layoffs, furloughs, or paid time off. Reports from District banks indicate substantial and widespread increases in demand for banking services.
Ninth District economic activity decreased sharply due to the pandemic. Employment fell significantly, and wage pressures declined as a result. While effects varied widely, most sectors contracted, with tourism and hospitality seeing effects sooner. Though designated an essential industry in most District states, many commercial construction projects were put on hold due to uncertainty about viability or supply chain disruptions.
After holding fairly steady in the first half of March, economic conditions declined sharply in recent weeks. Consumer spending slowed significantly as auto, restaurant and tourism sales plummeted. Manufacturing activity contracted sharply, and energy and agricultural sectors deteriorated as commodity prices fell sharply. Employment levels fell slightly, but layoffs accelerated late in the month.
Economic activity contracted broadly, but declines were the steepest in energy, retail, and non-financial services. Home sales rose through mid-March but have dropped off since then. Employment fell sharply, resulting in downward wage pressures, and selling prices buckled amid falling demand for most products and services. Outlooks deteriorated rapidly as the economic impact of the coronavirus pandemic intensified.
Economic activity in the Twelfth District contracted notably. Employment declined due to virus related disruptions. Price inflation fell a bit. Sales of retail goods and vehicles fell precipitously, and consumer and business services activity declined sharply. The manufacturing sector contracted moderately, and activity in the agriculture sector slowed somewhat. The residential real estate market was mixed, but grew slightly overall. Lending actively declined moderately.
Posted: April 15, 2020 Wednesday 02:00 PM