U.S. businesses continued to be hammered by the effects of the novel coronavirus epidemic in the United States 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 U.S. 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 U.S. death toll approaching 100,000.
The Fed's survey, known as the "Beige Book," was completed mostly in April, when non-essential businesses were shut down in much of the country, through May 18, 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.
More than 38 million Americans have filed for unemployment benefits over the past two months, and the U.S. unemployment rate soared to 14.7% in April.
The collection of anecdotes from the Fed's districts showed many 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.
But the report also made clear most businesses were still grappling with the fallout, even with an easing of restrictions.
"Contacts cited challenges in bringing employees back to work, including workers’ health concerns, limited access to childcare, and generous unemployment insurance benefits," the Fed said.
Some of those jobs in the most affected industries such as leisure, travel and hospitality are unlikely to swiftly return and other businesses are navigating how to accommodate social distancing requirements, which could mean fewer customers. Consumer confidence also remains low.
"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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