The coronavirus pandemic has resulted in a “sharp and brutal contraction in economic activity in all major regions of the United States,” according to the Fed. Unemployment is rising and prices are falling.
The restrictive measures taken to fight the coronavirus pandemic have resulted in “a sharp and brutal contraction in economic activity in all major regions of the United States,” said the Federal Reserve in its latest Beige Book published Wednesday evening.
This document, which is based on surveys of business managers from the 12 major economic regions of the United States, underlines that the leisure and hotel sectors as well as retailers (excluding essential products such as food) have were most severely affected.
But even the sectors which are experiencing high demand (food, medical equipment) find it difficult to cope with problems of delays and disruptions in their supply chains. Other industrial sectors such as the automobile are almost at a standstill, while the energy sector suffers from low prices and has reduced its investments as its production.
The worst seems to come for the economy
In addition, “most” of the companies surveyed “expect conditions to deteriorate in the coming months,” the US Central Bank added in the report, which was based on data collected before April 6.
Prices are generally oriented downward, with the exception of significant increases in essential services such as freight, certain agricultural commodities and certain consumer goods.
Although a number of employers have mentioned their intention to re-hire their employees as soon as their activity resumes, the current trend remains to the continuation of job cuts, notes the Fed.
Towards the deepest recession since the 1930s
To limit the effects of the Covid-19 crisis on the US economy, the Federal Reserve has cut its key rates to zero and launched a series of asset buy-back programs to provide almost unlimited liquidity financial markets and American businesses. For its part, the federal state has adopted a $ 2.2 trillion support plan to cope with the health crisis and to help businesses and American citizens hit by unemployment.
Economists expect a recession in 2020 in the United States, accompanied by an unemployment rate above 15%, followed by a recovery in 2021 if the coronavirus epidemic is brought under control. Unemployment has already exploded in the United States, with 16.7 million new claimants in three weeks.
In its latest forecast released Tuesday, the IMF said it expected a 3% decline in world GDP in 2020, the worst recession since the 1930s. For the United States, the International Monetary Fund expects a decline of 5.9% of GDP in 2020, before a rebound of 4.7% in 2021.
The next Fed monetary meeting is scheduled for April 28 and 29.