Apart from initial jobless claims, other early indicators of the economic hit occurring as a direct result of the efforts to contain the coronavirus are the various business manager surveys conducted across the country each month by regional Federal Reserve banks. The first of these gauges have started to trickle in and the results are in line with what one would expect given the speed with which mandated business closures and shelter-at-home orders have ground activity to a halt across many industries. For example, the general business conditions indexes from the Federal Reserve Banks of Philadelphia and New York each experienced their largest monthly decline on record in March, and plunged to the lowest level since 2012 and 2009, respectively. Both headline gauges also turned negative this month, signaling a net contraction in activity.
Forward looking measures softened as well in March, but less so than the current conditions gauges, and the main 6-months-ahead indexes encouragingly remained in positive territory (signaling expansion). This is perhaps a sign that many business managers for now continue to be hopeful that activity can bounce back quickly once the spread of the virus is under control and the government-mandated containment efforts are finally lifted. However, other challenges remain for goods-producers. The Dallas Fed’s survey results, for instance, will be released next week and the hit could be even bigger here because many local economies in this region have close ties to the energy sector, which has been under a lot of pressure lately as oil prices have tumbled. Another unneeded headwind for domestic manufacturers is the strengthening (for now) U.S. dollar. Indeed, the greenback has been one of the preferred safe havens for investors across the globe fleeing risk assets in March. This rapid appreciation is a challenge for any American manufacturers who sell a lot of goods overseas because not only are their sales already likely drop due to weaker global economic growth (other countries dealing with their own COVID-19 outbreaks), but now their products have almost overnight become significantly more expensive for foreign buyers, in turn drastically hurting U.S. goods-producers' competitiveness in the marketplace.
Sources: Econoday, FRBP, FRBNY