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The outlook: The social-distancing mandate needed to stem the coronavirus epidemic led to a sharp and abrupt contraction in economic activity across all regions of the country, according to the Federal Reserve’s Beige Book report released Wednesday. And most business contacts think it will get worse.
The report said leisure and hospitality and retail, apart from essentials like food stores, were the hardest hit industries.
What happened: Even the rare industry that saw increased demand — producers of food and medical equipment — faced trouble in the form of production delays and supply chain disruptions. Other manufacturing industries, like autos mostly shut down. The general direction of prices was down but there were some significant prices increases for essential services such as freight, and some agricultural commodities and consumer goods. A number of employers hoped to bring back workers they cut once activity resumes, but the outlook was for further job reductions.
Big picture: The Fed is trying to keep the financial markets functioning so that the economy can recovery quickly once the pandemic eases. And Congress is trying to provide households and businesses with funds to keep them afloat during these trying times. But the economy was still going to suffer as activity came to a standstill in mid-March.
What are they saying? “All told, the tone of the Beige Book is a bleak as the economic reality we see every day,” said Thomas Simons, an economist at Jefferies.
Market reaction: U.S. equity benchmark indexes were lower Wednesday as government data began to paint the picture of a severe slowdown as a result of the coronavirus shutdown. The Dow Jones Industrial Average DJIA, -1.44% was down 500 points in mid-afternoon trading.
