Fed's Beige Book: Securing PPP loans helped many businesses to limit or avoid layoffs

Economic activity declined in all districts, falling sharply in most, reflecting disruptions associated with the COVID-19 pandemic, the Federal Reserve said in its Beige Book on Wednesday.

Additional takeaways

"Employment continued to decrease in all districts."

"Consumer spending fell further as mandated closures of retail establishments remained largely in place during most of the survey period."

"Securing PPP loans helped many businesses to limit or avoid layoffs."

"Spending declines were especially severe in the leisure and hospitality sectors; auto sales were substantially lower than a year ago, although several districts noted recent improvement."

"Employment continued to fall sharply in retail and in the leisure and hospitality sectors."

"Contacts cited challenges in bringing employees back to work, including workers’ health concerns, limited access to childcare, and generous unemployment insurance benefits."

"A majority of districts reported sharp drops in manufacturing activity, and production was notably weak in auto, aerospace, and energy-related plants."

"Residential home sales plunged and construction activity also fell."

"Overall wage pressures were mixed - some firms cut wages, others raised them temporarily for the essential staff or to compete with unemployment benefits."

"Energy activity plummeted as firms announced oil well closures."

"Although many contacts expressed hope that overall activity would pick up as businesses reopened, the outlook remained highly uncertain."

"Most districts noted wage increases in high-demand and essential sectors, while wages were flat or declining in other sectors."

"Most district contacts were pessimistic about the potential pace of US economic recovery."

"Pricing pressures varied but were steady to down modestly on balance."

"Weak demand weighed on selling prices, with some contacts noting discounting for apparel, hotel rooms, and airfares."

"Supply chain disruptions and strong demand led to higher prices for some grocery items including meat and fresh fruit."

"One district reported that firms faced additional costs related to safety protocols and social distancing compliance."

Market reaction

The US Dollar Index largely ignored these remarks and was last seen gaining 0.08% on the day at 99.10.