Beige Book
For use at 2:00 PM EDT
Wednesday
May 27, 2020
The Beige Book
Summary of Commentary on Current Economic Conditions
By Federal Reserve District
May 2020
Federal Reserve Districts
Minneapolis
Boston
Chicago
New York
Cleveland
Philadelphia
San Francisco
Kansas City
St. Louis
Richmond
Atlanta
Dallas
Alaska and Hawaii
are part of the
San Francisco District.
The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth of Puerto Rico and the U.S. Virgin
Islands; the San Francisco Bank serves American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.
National Summary
Boston
1
A-1
First District
New York
B-1
Second District
Philadelphia
C-1
Third District
Cleveland
D-1
E-1
Fifth District
Atlanta
F-1
Sixth District
Chicago
G-1
Seventh District
St. Louis
H-1
Eighth District
Minneapolis
The Beige Book is a Federal Reserve System publication about current
economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety
of mostly qualitative information, gathered directly from District
sources.
The qualitative nature of the Beige Book creates an opportunity to
characterize dynamics and identify emerging trends in the economy
that may not be readily apparent in the available economic data. Because this information is collected from a wide range of business and
community contacts through a variety of formal and informal methods,
the Beige Book can complement other forms of regional information
gathering.
How is the information collected?
Fourth District
Richmond
What is The Beige Book?
Each Federal Reserve Bank gathers anecdotal information on current
economic conditions in its District through reports from Bank and
Branch directors, plus phone and in-person interviews with and online
questionnaires completed by businesses, community contacts, economists, market experts, and other sources.
How is the information used?
The anecdotal information collected in the Beige Book supplements the
data and analysis used by Federal Reserve economists and staff to
assess economic conditions in the Federal Reserve Districts. This
information enables comparison of economic conditions in different
parts of the country, which can be helpful for assessing the outlook for
the national economy. The Beige Book also serves as a regular summary of the Federal Reserve System’s efforts to listen to businesses
and community organizations.
I-1
Ninth District
Kansas City
J-1
Tenth District
Dallas
K-1
Eleventh District
San Francisco
Twelfth District
L-1
This report was prepared at the Federal Reserve Bank of Kansas City
based on information collected on or before May 18, 2020. This docu‐
ment summarizes comments received from contacts outside the
Federal Reserve System and is not a commentary on the views of
Federal Reserve officials.
National Summary
The Beige Book ■ May 2020
Overall Economic Activity
Economic activity declined in all Districts – falling sharply in most – reflecting disruptions associated with the COVID-19
pandemic. Consumer spending fell further as mandated closures of retail establishments remained largely in place
during most of the survey period. Declines were especially severe in the leisure and hospitality sector, with very little
activity at travel and tourism businesses. Auto sales were substantially lower than a year ago, although several Districts
noted recent improvement. 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 due in part to fewer new
listings and to restrictions on home showings in many areas. Construction activity also fell as new projects failed to
materialize in many Districts. Commercial real estate contacts mentioned that a large number of retail tenants had
deferred or missed rent payments. Bankers reported strong demand for PPP loans. Agricultural conditions worsened,
with several Districts reporting reduced production capacity at meat-processing plants due to closures and social distancing measures. Energy activity plummeted as firms announced oil well closures, which led to historically low levels
of active drilling rigs. 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.
Employment and Wages
Employment continued to decrease in all Districts, including steep losses in most Districts, as social distancing and
business closures affected employment at many firms. Securing PPP loans helped many businesses to limit or avoid
layoffs, although employment continued to fall sharply in retail and in 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. Overall wage pressures were mixed as some firms cut wages while others
implemented temporary wage increases for essential staff or to compete with unemployment insurance. Most Districts
noted wage increases in high-demand and essential sectors, while wages were flat or declining in other sectors.
Prices
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 airfare. Several Districts also reported low commodity
prices, including oil, steel, and several agricultural commodities. 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, while another District noted that the costs of personal protective equipment had risen due to strong demand.
Highlights by Federal Reserve District
Boston
New York
Activity continued declining as a result of pandemicrelated economic shutdowns and social distancing
guidelines. Retail and tourism firms cut employment,
staffing firms saw reduced demand, and most manufacturing contacts froze hiring. Respondents said the outlook was very uncertain.
The regional economy continued to contract since the
last report, though there were scattered signs of a pickup
in early May. Businesses reported widespread layoffs
and flat to declining wages, but the vast majority of separations were deemed temporary. Prices paid rose slightly, while selling prices edged down. Leisure & hospitality
and retail trade have remained the most severely affected. Financial firms reported weaker activity.
1
National Summary
Philadelphia
St. Louis
Business activity continued to fall sharply during the
current Beige Book period, as the COVID-19 pandemic
persisted. Nearly all sectors are operating at lower levels
of activity. Government assistance eased liquidity concerns and addressed rapidly rising joblessness. General
prices have begun to fall, but the wage path remains
mixed. Firms also remain uncertain of the future.
Economic conditions have weakened moderately since
the previous report. Around half of firms are closed
temporarily. Among the firms that are closed, about onethird expect to reopen in the next 3 weeks. Banks indicated a sharp increase in delinquencies, primarily in
mortgages, credit cards, and auto loans, but expect
fewer delinquencies in the third quarter.
Cleveland
Minneapolis
Customer demand declined in a broad range of industries. The few areas of strength were limited to grocery
sales and business lending. Firms responded with widespread layoffs, deep cuts to capital spending, and wage
reductions for a growing minority of firms. Inflation pressures eased because of weak demand and lower commodity prices. Though many firms believe the worst
declines have passed, few are expecting a strong recovery.
The Ninth District economy contracted further. Employment fell significantly, and wage pressures fell due to the
decline in activity along with wage and salary cuts by
some firms. While most sectors declined, oil and gas
exploration and supporting industries saw a particularly
steep decline as oil prices fell dramatically. Restaurants,
lodging, and tourism continued to suffer, and agriculture
fell from an already low level.
Richmond
The Fifth District economy contracted further in recent
weeks as the shutdown measures to slow the spread of
the COVID-19 outbreak continued to have severe consequences. Retail, travel, and hospitality remained some of
the hardest hit industries, but negative impacts were
reported in every sector. Employment declined sharply
and price growth slowed slightly, remaining modest.
Economic activity declined substantially since the previous survey, and contacts remained pessimistic about
future levels of activity. Contacts reported broad-based
declines in consumer spending. Real estate activity
declined significantly, and sales fell at transportation,
wholesale trade and professional and high-tech services
firms. Manufacturing activity contracted sharply, and
energy and agricultural sectors weakened further.
Atlanta
Dallas
Economic conditions remained weak. Labor markets
were soft and nonlabor costs decreased. Retail sales of
essential products and services rose and ecommerce
activity grew. Hospitality activity continued to weaken.
Residential real estate slowed somewhat and commercial real estate activity was mixed. Manufacturing activity
decreased as new orders fell. Banking conditions were
mixed.
Economic activity contracted further, though the pace of
decline moderated from April to early May in manufacturing and services. Oilfield activity fell to record lows.
Home sales dropped sharply but were beginning to
slowly improve. Employment plummeted, and selling
prices fell. Outlooks were bleak and uncertain, largely
centered on the speed and scope of the reopening.
Chicago
Economic activity in the Twelfth District contracted markedly. Employment declined dramatically due to virus
related disruptions. Prices remained generally flat. Activity in retail trade, consumer and business services, and
manufacturing all contracted noticeably. Activity in the
agriculture sector slowed further. The residential real
estate market was mixed, while the commercial side
slumped. Lending activity increased due to PPP loans.
Kansas City
San Francisco
Economic activity declined sharply as the coronavirus
caused major economic upheaval. Employment, consumer spending, business spending, construction and
real estate, manufacturing, and agriculture all decreased
substantially. Wages edged up and prices were little
changed. Financial conditions improved modestly.
2
Federal Reserve Bank of
Boston
The Beige Book ■ May 2020
Summary of Economic Activity
Economic activity continued to decline into May according to First District business contacts. Many retailers and almost
all hospitality businesses reported low to nil activity levels because of the pandemic. Responding manufacturers and
staffing firms cited ongoing fall-offs in sales or revenue in recent weeks, but mostly still at sustainable levels. Commercial and residential real estate markets continued to be on pause, with some retail tenants reportedly having difficulty
paying rent. Many firms furloughed or laid off workers, but some, involved in “essential” or pandemic-fighting businesses, retained staff and even continued hiring. Near-term outlooks were highly uncertain and generally downbeat.
All sales since the shutdown were online; once in-person
sales resume, they are optimistic that transactions will
recover further. One retailer continued to see year-overyear increases in sales and profits from online sales,
with a large increase in first-time online users.
Employment and Wages
Employment was generally down among business contacts. At auto dealers, many sales workers were furloughed as transactions moved online. Many employees
at year-round tourist operations were laid off. Eight of 10
manufacturers said they had frozen or largely frozen
hiring; the two exceptions cited increased output. Some
manufacturers laid off or furloughed workers and some
implemented pay reductions but, for the most part, headcount and pay remained at pre-pandemic levels. Many
firms reported providing hourly supplements for production workers because of work-related risks. While their
overall bookings declined, staffing contacts reported that
hiring employers were generally offering increased pay
to candidates, as much as 25 percent to 30 percent
higher than before the pandemic; they expect these
higher pay rates to be temporary.
Restaurants across Massachusetts effectively halted
service in mid-March. Upwards of 200,000 workers in
Massachusetts restaurants were either furloughed or laid
off since then. Fewer than half of full-service restaurants
attempted takeout business and many found it not sustainable or profitable. Social distancing rules mean that
most restaurants will be able to operate at only 35 percent to 40 percent of capacity, which may not be profitable for many establishments.
Travel industry contacts reported a 65 percent decline in
hotel occupancy across New England, and a decline in
excess of 80 percent in Greater Boston for April; those
figures exclude hotels that were shuttered. Large conventions have been canceled through early fall, and over
200,000 hotel room nights will be lost as a result. In
summer destinations, concerns heading into Memorial
Day weekend remained high. A contact for one coastal
area reported a stark increase in inquiries about bankruptcy procedures from small retailers. Some optimism
remains that visitors driving-distance away will satisfy
their pent-up vacation demand locally.
Prices
Few contacts mentioned pricing. Auto dealers reported
financing incentives for cars. No manufacturing contacts
cited any unusual pricing, except that milk prices collapsed because of reduced sales to restaurants.
Retail and Tourism
Respondents continued to report major disruptions related to COVID-19. Weekly automobile sales in Connecticut dropped 60 percent from February to mid-April,
though rebounds began in the final week of April; nonetheless, weekly sales remained down about 30 percent.
A-1
Federal Reserve Bank of Boston
Manufacturing and Related Services
Commercial Real Estate
Experiences varied widely among 10 responding manufacturers. Four firms reported higher sales than a year
earlier. For two semiconductor firms, demand for consumer electronics remained strong. For a diagnostic
equipment maker, the mix of demand changed, with less
from universities and more from hospitals and other
institutions on the front line of the fight against COVID19. A dairy firm saw “tremendous growth” in March as
households stocked up. The explanations for firms with
weaker sales ranged from demand reductions from the
auto industry and commercial aviation to productivity
declines related to COVID-19 prevention.
Commercial real estate activity in the First District came
to a halt in March because of the COVID-19 shutdown.
There were no leasing and investment sales activities
except for a few time-sensitive transactions or lease
renewals in Boston, Providence, and Hartford. Most
office and industrial tenants were able to pay April rents,
but retail tenants struggled. May rent collection was
expected to be challenging, and lenders and landlords
have been considering payment relief measures. Many
tenants were also trying to renew their leases with shorter terms. Business sentiment was cautious and observant.
Nine of the ten contacts said that all their facilities were
open and only a few reported that any plants were shut
at any point since the pandemic started. These firms’
processes were well-suited to social distancing, with well
-defined schedules and activities that required no contact
between workers. Six contacts, including one with rising
sales, reported negative revisions to capital spending.
In the Boston market, renewing tenants were likely to
have their rents lowered. Construction in and around
Boston was mostly put on hold, except for some essential building projects. In the Hartford area, tenants asked
to renew leases for very short periods or to postpone
renewal decisions. In the investment sales market, projects in progress still happened, but new projects were
pulled off the market or not initiated.
The outlook was pessimistic for almost all manufacturing
contacts. A veterinary products maker said they expected demand to pick up this summer. By contrast,
most respondents said they were very uncertain about
when or even if demand would return to previous levels.
Residential Real Estate
Residential real estate markets in the First District
slowed down in March and April due to the outbreak of
COVID-19. For single family homes, closed sales decreased in all reporting areas and Rhode Island and New
Hampshire experienced double-digit drops in pending
sales. (Rhode Island, New Hampshire, and Maine reported year-over-year changes from April 2019 to April 2020.
Massachusetts and Boston reported statistics only
through March. Connecticut and Vermont data were
unavailable.) For condos, sales declined in all reporting
areas but Boston. Nonetheless, a seller’s market prevailed, with median sales prices increasing and inventory
dropping substantially in all reporting areas for both
single family homes and condos.
Staffing Services
Overall demand and placement activity at New England
staffing firms slowed compared to pre-pandemic levels,
but did not halt. Labor supply was mixed: one firm saw
three or four times as many replies to a job posting as
before COVID-19; others described supply as volatile. A
majority of contacts noted that for some people, unemployment benefits could outweigh a salary, providing less
incentive to find a job. Some employers were interviewing and onboarding direct-hires virtually in the past six
weeks—a sign that companies were looking beyond the
current situation.
The pause in market activity was expected by many
contacts, since COVID-19 restrictions limited the availability of showings and squelched many sellers’ moving
plans. Looking forward, contacts expressed generally
optimistic views on the post-pandemic outlook but considerable concern about near-term uncertainty related to
lifting economic restrictions associated with the pandemic.■
Firms reported finding ways to cope with the challenges
brought on by COVID-19, with new business strategies
or new sales people in some cases. All contacts who
were eligible for the Payroll Protection Program received
funding, which they regarded as vital support; businesses were also lining up other credit lines and resources in
the face of uncertainty. The majority of contacts reported
no major structural or compensation changes within their
organizations due to COVID-19. Overall, contacts expressed optimism, “excited” (as one put it) to facilitate
hiring during the upcoming recovery.
For more information about District economic conditions visit:
www.bostonfed.org/regional‐economy
A-2
Federal Reserve Bank of
New York
The Beige Book ■ May 2020
Summary of Economic Activity
The Second District economy contracted substantially again in the latest reporting period, as widespread closures and
stay-at-home orders severely constrained business activity. Employment continued to decline, and wages were mixed
but down modestly, on balance. Businesses reported that input prices rose slightly but selling prices decreased slightly.
Activity fell in every sector, with particularly widespread declines in leisure & hospitality. However, business contacts
tended to be less pessimistic than in the prior report about the near-term outlook, and those in the manufacturing, construction, real estate, and health services sectors expected modest improvement. Consumer spending has fallen further,
though there have been scattered reports of a nascent pickup in early May, as more parts of the economy have started
to reopen. Tourism and travel have remained moribund, with hotels and airlines continuing to see very little business.
Home sales and residential leasing activity have remained down sharply, as have commercial leasing and construction
activity. Finally, banks reported further moderate weakening in loan demand, tighter credit standards, and higher delinquency rates but also greater leniency on existing loans.
while those in leisure & hospitality, retail, finance, and
professional & business services projected steady staffing levels. Businesses across other sectors expected
moderate staff cuts, on net, in the months ahead.
Employment and Wages
The labor market has remained weak, as widespread
layoffs have continued and hiring has been spotty. Two
major employment agencies—one in New York City and
another in upstate New York—noted that hiring was
sluggish in April, though the latter noted a modest pickup
in early May. A wide array of business contacts, as well
as employment service firms, reported widespread
layoffs and furloughs, especially at small to mediumsized businesses. However, the vast majority of these
were viewed as temporary, with workers expected to be
re-hired when business activity rebounds. Some businesses have already made efforts to recall laid off workers, as well as hire new workers. A number of these
firms noted that this has been challenging, with many
unemployed workers reluctant to return to work—some
attributed this to generous unemployment benefits, as
well as safety concerns.
Wages have mostly been flat to lower since the last
report. Businesses in the hard-hit leisure & hospitality
sector continued to report widespread reductions in
wages, whereas contacts in health services and finance
indicated steady to modestly rising wages. Contacts in
other service industries reported modest declines in
wages.
Prices
Input costs were mixed but up modestly, on balance,
with a number of contacts noting extra costs associated
with installing and maintaining safety protocols. As in the
last report, selling prices were steady to down modestly.
Businesses in leisure & hospitality noted fairly widespread price cuts, while those in health & education
services and wholesale trade characterized their selling
prices as steady. Contacts in other sectors reported
slight declines in the prices they receive.
Reports from across business sectors remained negative. Contacts in leisure & hospitality, transportation,
retail, and construction reported the most widespread
staff reductions, while businesses in manufacturing,
information, finance, and professional & business services noted modestly declining staffing levels.
Consumer Spending
Retailers reported further widespread drops in sales in
April, with many malls and establishments still shut
down, as those classified as non-essential were ordered
Looking ahead, contacts in both manufacturing and real
estate said they expect a modest pickup in employment,
B-1
Federal Reserve Bank of New York
to close in March. With New York and New Jersey easing restrictions in recent days, some retailers have been
allowed to reopen with curbside pickup. Retailers have
also sometimes been able to shift to online sales, though
often with much-reduced volume. Food, personal care,
and other stores deemed essential have tended to fare
better. Retailers expected sales to be steady to down
modestly in the months ahead.
tional visitors, the most profitable segment—noting that
Broadway theaters are closed until at least Labor Day.
Real Estate and Construction
Home sales markets across the District have largely
ground to a halt, with almost no new transactions and
home viewing limited to virtual showings. The residential
rental market has slowed but not quite as dramatically. A
local real estate authority noted that new rental leasing in
New York City was down about 70 percent, while renewals were up, and that there has been a pickup in demand
for single-family home rentals outside the city. A major
appraiser noted that it’s almost impossible to gauge
changes in prices and rents during this pandemic due to
a dearth of transaction activity.
Vehicle sales ground to a halt starting in mid-March,
according to dealers in upstate New York, but picked up
slightly into April, due to adoption of remote sales platforms. Dealers reported a further pickup in the first half
of May, as restrictions on showroom visits were eased
somewhat. While essential dealer repair services remained open, volume was much lower than usual.
Commercial real estate markets across the District also
remain moribund, with April marking a record low in new
leasing activity and some companies pulling out of leases. A contact at a major commercial real estate firm
estimated that only about 10 percent of tenants in both
office and industrial space have fallen behind on rent,
thus far, but that the corresponding rate for retail tenants
is well over 50 percent. Even beyond that, for some mall
retailers, rent is assessed a share of sales revenue.
More generally, real estate contacts were more optimistic than contacts in other sectors about the near term
outlook.
Manufacturing and Distribution
Manufacturing, transportation, warehousing, and wholesale trade firms reported a further drop-off in business
activity in recent weeks. However, there was substantial
variation across segments, with those manufacturing and
distributing essential goods faring much better than
average. New York State and New Jersey are lifting
restrictions on manufacturing before most other sectors.
Looking ahead, manufacturers expect activity to rebound, while wholesale and transportation firms foresee
further weakening in activity. Businesses have continued
to cut both actual and planned capital spending.
New construction starts have essentially remained at
zero, and ongoing construction projects remained
paused, except where considered essential. However,
this is likely to pick up as states ease restrictions on
construction activity in the days ahead.
Services
Service industry contacts reported continued widespread
deterioration in business activity. Leisure & hospitality
contacts reported particularly widespread declines in
activity, as restaurants remained shut down for dine-in
service and hotels suffered from an almost complete
drop-off in travel and tourism.
Banking and Finance
There was widespread interest, among businesses in all
sectors, in the SBA Paycheck Protection Program loans,
though some contacts expressed concerns about the
program’s implementation and accessibility. Separately,
small to medium sized banks across the District reported
lower loan demand across all categories, but most dramatically from the commercial segment. Banks reported
tightening credit standards across all categories except
consumer loans. Loan spreads narrowed on all categories except C&I loans. Respondents reported widespread declines in average deposit rates. Bankers reported higher delinquency rates but more lenient policies
for delinquent accounts across all categories. ■
Contacts in professional & business services also indicated steep declines in activity, while businesses in the
information, health, and education sectors all reported
more moderate, but still fairly widespread, declines.
Looking ahead, business contacts continued to express
great uncertainty about whether and when business
would get back to reasonably normal levels, but there
continued to be fairly widespread pessimism. A contact
in air transportation expects any rebound in air travel to
be slow and led by the leisure segment, noting a modest
recent pickup in advance bookings for late 2020. A contact in New York City’s tourism sector expects any rebound in visitations to be slow—particularly for interna-
For more information about District economic conditions visit:
www.newyorkfed.org/regional‐economy
B-2
Federal Reserve Bank of
Philadelphia
The Beige Book ■ May 2020
Summary of Economic Activity
Third District business activity continued to fall sharply during the current Beige Book period, as the COVID-19 pandemic persisted across most of the mid-Atlantic region. Statewide stay-at-home orders and mandated closures of nonessential businesses remained in place for most of the current period. Economic contraction continued at a moderate or steep
rate for manufacturing, services, and most consumer sectors; tourism fell modestly further to a near zero-level. Real
estate sector activity was mixed. Firms continued to furlough or lay off workers even as Paycheck Protection Program
(PPP) loans surged onto banks’ ledgers. The wage path remains unclear, although downward pressure may emerge
once hardship pay is no longer needed. Prices fell modestly, as lower demand and low oil prices prevailed. As mandated closures begin to lift, firms are hopeful that business will resume. However, contacts are uncertain how fearful consumers will be while the COVID-19 threat remains and how freely consumers will spend after the threat lifts.
Employment and Wages
one-third of the nonmanufacturing firms reported decreases in wage and benefit costs.
Employment continued to contract sharply. By mid-April,
over half of the firms reported that employment had
declined. A greater percentage reported a shorter average workweek. By the end of the period, about eight
percent of the firms in our weekly survey reported that
they had shut down. In other responses, almost 40 percent ceased all hiring and 25 percent reported employee
furloughs and reductions of employees’ average work
hours.
Prices
On balance, more contacts reported lower prices rather
than higher during the period, except for spikes associated with scarcity and hoarding. However, well over half of
all firms noted no change in prices.
Falling demand and lower prevailing oil prices were cited
as factors for generally lower prices. Price spikes were
noted for fresh fruit. A Pennsylvania homebuilder observed that the sector’s shutdown had compressed
backlogs and increased short-term demand for materials. An analyst for the transportation services sector
noted that after having cut capacity in prior downturns,
firms sometimes took the position expressed by one, “I’m
not adding people, I’ll take it in price.”
Staffing firms reported that activity was down in a range
from 35 percent to 50 percent. One contact observed
that over the course of a day, a recruiter might make 40
calls to prior job candidates, speak with four, and hire
one. In our weekly survey, just 10 percent of the firms
reported that they had recalled furloughed workers.
When asked about impediments to recalling workers, 33
percent of the firms noted fear of infection and 25 percent noted lack of childcare; overcoming the lure of
expanded unemployment benefits was noted by 29
percent of the firms.
Manufacturing
According to manufacturing contacts, the contraction
became broader and steeper during the current period.
At mid-April, about three-fourths of the firms reported
decreases in shipments and in new orders.
The path of wages continued to be unclear, as firms
offered mixed reports of various wage strategies. Some
firms are still paying premiums to attract and retain
frontline workers. Other firms were forced to cut wages,
hours, and overtime in order to survive. In mid-April, over
By the end of the period, three-fourths of the firms in our
weekly survey reported that sales or new orders were
down by greater than 5 percent of expectations prior to
C-1
Federal Reserve Bank of Philadelphia
the pandemic; one-third reported decreases in excess of
30 percent or had shut down.
loan growth. Auto loans and other consumer loans fell
moderately and steadily throughout the period; credit
card volumes fell sharply throughout. By comparison,
commercial and residential real estate lending trended
about the same as in the same period one year ago.
According to several firms with global perspectives,
supply chain problems have shifted from China to Mexico. One contact observed that Europe and the U.S. will
not recover as easily from the pandemic as China did
and that many facility investments in the U.S. have been
delayed. A key supplier noted that U.S. manufacturing
activity is down nearly 20 percent and “moving sideways
now.”
Banking contacts noted increased optimism among their
clients after PPP loans had been widely disbursed. Our
weekly firm surveys also reflected increasing optimism
from early April, when 28 percent of the firms were very
concerned about maintaining solvency over the next
month, and early May, when 18 percent of the firms were
very concerned. Bankers noted that existing aid, loan
extensions, and forbearance would carry most firms for
the next three to six months, but problems may arise in
the third quarter. Contacts most often noted hospitality
and hospitals among the sectors of greatest concern.
Consumer Spending
On balance, nonauto retail sales declined further, but the
pace of decline was moderate, not steep as before.
Where possible, retailers and restaurants have further
ramped up delivery and take-out services. However, the
first clutch of many anticipated restaurant closings was
announced in the Philadelphia area as the period ended.
Real Estate and Construction
Homebuilders maintained a lower level of construction
activity similar to the end of the prior period, and Pennsylvania builders began restarting in early May. Builders
noted that they were slowly converting most of their prior
deposits into final contracts, but they were seeing too
little traffic to sustain future activity.
Sales of new and used cars fell sharply again this period,
but by early May, dealers and customers became more
accustomed to online sales, which partially offset the
steeper April decline. Sales, service, and profits are far
below prior-year levels.
After a full six weeks at a near standstill, tourism was
modestly lower than the average of the entire prior period. A majority of hotels, resorts, and attractions remain
closed. As of May 9, a tourism analyst estimated that
weekly travel spending was down nearly 90 percent from
prior-year levels in Pennsylvania, and down about 85
percent in Delaware and New Jersey. Only as this period
drew to a close were a few more attractions, such as
beaches and golf courses, beginning to reopen.
Existing home sales declined sharply. Real estate contacts reported that potential sellers showed little interest
in listing, much less showing, their homes, and fewer
buyers were in the market. Brokers noted that credit
markets were tightening and that interested buyers tended to be younger.
Philadelphia’s commercial real estate construction grew
slightly at lower levels as some projects started back up
in early May; however, some sites chose not to restart,
and other projects are slowing delivery. Contacts noted a
decline in new plans and little commercial construction
financing. “None of our normal metrics apply,” an analyst
stated of the commercial sales/leasing market, which
continued a modest decline. April rent collections, which
were down somewhat for office and industrial space,
were down significantly for retail space. ■
Nonfinancial Services
Even more so than manufacturers, a broader cross
section of service sector firms reported declining new
orders/sales in the current period than before – resulting
in another severe overall decline. At mid-April, almost
nine-tenths of the firms reported decreases of sales or
revenues, and two-thirds of the firms reported decreases
of new orders.
By the end of the period, over 70 percent of the firms in
our weekly survey reported that sales or new orders
were down by greater than 5 percent of prior expectations; nearly 40 percent reported decreases in excess of
30 percent or had shut down.
Financial Services
The volume of bank lending grew rapidly over the period
as commercial banks originated an enormous number of
new loans to firms under the PPP. However, demand for
consumer loans diminished and partially offset the PPP
For more information about District economic conditions visit:
www.philadelphiafed.org/research-and-data/regionaleconomy
C-2
Federal Reserve Bank of
Cleveland
The Beige Book ■ May 2020
Summary of Economic Activity
The Fourth District’s economy deteriorated further in the current reporting period after it contracted sharply in the previous period. Firms across a broad range of sectors reported declines in customer demand. The shuttering of physical
stores and reduced travel because of the coronavirus pandemic kept sales weak for retailers and hospitality establishments. Reduced foot traffic also hamstrung auto and home sales. Manufacturing orders declined, and producers
slashed capital investments, although a number of contacts believe their current backlogs will tide them over until demand improves. The slower pace of construction activity, reduced manufacturing production, and weak consumer
spending resulted in low cargo volumes. Relatively strong areas of economic activity included grocery sales and business lending. Firms responded to weak customer demand by reducing staff levels and in some case by cutting wages.
Inflation pressures eased because of weak demand and lower commodity prices. A sizeable share of firms believed the
worst declines in demand have passed. However, few expect a strong recovery given the uncertainty of the coronavirus’s path.
and unemployment benefits that disincentivized workers
from rejoining payrolls.
Employment and Wages
Employment declined in a broad range of sectors as
layoffs were widespread and hiring was limited to a
handful of firms. Half of contacts reported decreasing
staff levels during the current period, compared with
about 40 percent that did so in March. Furthermore, only
one-third of contacts who reduced staff levels expect to
rehire close to the full number of separated staff when
their businesses reopen. This expectation suggests
employment is unlikely to climb back to pre-pandemic
levels quickly after businesses reopen. Firms that held
their staff levels flat tended to be in financial services,
construction, real estate, or manufacturing. In several
cases, firms in these sectors cited the Paycheck Protection Program as enabling employee retention. The few
firms that increased staff included grocers, who saw an
increase in at-home food demand and curbside pickup,
and a couple of large banks that needed back-office
support. Some retailers started to recall staff in limited
numbers as businesses were allowed to reopen. One
staffing firm reported that his clients were starting to
increase hours or bring back workers who were laid off.
Overall, wage pressures were flat. Although the majority
of firms left wages unchanged, one in five contacts reduced workers’ pay, a marked increase from the number
of contacts who did so in the previous period. Wage cuts
were concentrated in retail, real estate, professional
services, and civic organizations. Multiple contacts reported wage reductions of at least 10 percent for office
workers or nonfurloughed staff. In cases in which wages
increased, these increases tended to be for employees
at a variety of banks, transportation firms, and manufacturers. These firms raised wages for people who continued to work on site, in a number of cases by $1 to $3 per
hour.
Prices
Firms reported that input cost pressures eased because
of lower prices for commodities such as oil, steel, copper, cotton, and resins. The few cost increases that were
reported included those for meat and some inputs for
manufacturing and construction firms for which pockets
of supply-chains were temporarily disrupted. One in four
firms reduced selling prices because of weak customer
demand and lower commodity prices. This was the case
notably among residential builders who offered discounts
Multiple contacts in a variety of industries noted additional labor market challenges, including limited access to
child care services keeping workers away from job sites,
workers’ requesting to stay home out of fear of the virus,
D-1
Federal Reserve Bank of Cleveland
on homes, commercial real estate firms that reduced
rents, and transportation firms that lowered their rates.
Also, department stores and apparel retailers heavily
discounted their prices.
Looking ahead to the near-term, residential estate
agents were more optimistic that single-family home
demand would improve because of pent-up demand, low
interest rates, and low inventories of homes. Also, a
number of nonresidential builders expect delayed projects would come back online. Downside concerns included reduced infrastructure spending because of declines in state gasoline tax revenues. Also, higher education institutions are facing fiscal difficulties that could
lead to canceled projects. Finally, commercial real estate
firms worry that relatively high rates of nonpayment of
rent and rent deferrals will linger and depress profits.
Consumer Spending
Retail activity remained significantly lower than prepandemic levels. Restaurants saw dramatic reductions in
revenue because of the closure of dine-in services. Also,
a sharp decline in business travel significantly reduced
hotel bookings. Department stores and apparel retailers
saw deep reductions in sales because of the shuttering
of physical stores and were unable to fill the gap with
online sales. One auto dealer reported that the impact of
COVID-19 has been “unprecedented,” with total sales
down 55 percent year over year. By contrast, grocers
saw stronger demand as customers cooked more at
home. Many contacts expect customer demand will
improve somewhat as restrictions are lifted slowly. However, they feared consumer spending could be dampened if unemployment remained high and concerns
about contracting the coronavirus lingered.
Financial Services
Reports from financial services companies were mixed.
Bankers saw large numbers of business-loan requests
and draws on lines of credit in the second half of March,
and while this activity slowed somewhat in April, it remained robust. Several banks reported processing large
numbers of Paycheck Protection Program loans. On the
other hand, demand for consumer loans was down significantly outside of heightened activity in home mortgage refinancing. A wealth management advisor noted
that economic uncertainty drove increased demand for
his services; however, another contact reported dampened demand for insurance because of declines in business activity and vehicle miles driven.
Manufacturing
Manufacturing orders continued to slide. Several contacts noted that the shutdown of automotive production
was particularly painful; others reported that they anticipated long-lasting and adverse impacts to the aerospace
and energy sectors. More than two-thirds of contacts
indicated that capacity utilization is below its normal
range, citing lack of demand, inefficiency brought on by
social distancing, and difficulty convincing employees
that it is safe to come to work. Manufacturers believed
the worst declines in demand may have passed in April,
though the outlook for the rest of the year was still downbeat. Additionally, some contacts were optimistic that
their current backlogs would tide them over until demand
picks up again.
Professional and Business Services
Customer demand for professional and business services was mixed. One online shopping consultant reported an increase in demand in recent weeks, as did another contact who provides legal and strategic advice. A
corporate strategy advisor reported that customers have
recently started enquiring about potential investment
projects. By contrast, several contacts in a variety of
industries such as advertising consulting, landscape
development, robotics, and payroll support reported
continuing subdued demand for their services.
Real Estate and Construction
Freight Transportation
Construction activity fell for almost all residential and
nonresidential construction firms. Backlogs for nonresidential builders, that were heretofore relatively large,
diminished, with one builder’s saying the pandemic
caused 80 percent of the firm’s backlog to be postponed.
Real estate agents reported weaker home sales because of slower foot traffic. One custom home builder
tried selling homes online with limited success. Demand
from first-time home buyers weakened because of a
weak job market, and although interest rates are low,
potential buyers were having a harder time qualifying for
credit. One housing agency reported increased demand
for rental and utility assistance.
Weaknesses in the manufacturing, construction, retail,
and energy sectors resulted in weaker cargo volumes for
freight companies. Contacts highlighted reduced auto
and metal production as particular pain points. The difficulty for transportation firms is exacerbated by the fact
that freight volumes were already soft going into the
pandemic. The few bright spots in the sector are limited
to cargo for groceries and local and short-haul transportation. ■
For more information about District economic conditions visit:
www.clevelandfed.org/region
D-2
Federal Reserve Bank of
Richmond
The Beige Book ■ May 2020
Summary of Economic Activity
Economic activity in the Fifth District continued to decline after the sharp fall reported in our previous Beige Book. Manufacturers experienced declines in shipments and new orders, as well as cancellations of exiting orders, leaving some
with excess inventories. Ports saw steep declines in volumes compared to the same time last year although imports
from China increased somewhat. Trucking companies had a moderate decline in volumes as the increases in shipments
of essential supplies did not make up for the losses in other shipments such as retail goods. Most retailers reported very
little sales compared to last year and were concerned about low demand persisting for some time. Travel and tourism
remained depressed with hotels reporting little occupancy outside of some health care and construction workers. Some
restaurants pivoted to carry-out sales, while others remained closed. Home sales declined moderately and inventories
were further reduced from low levels as few new listings came on the market. Commercial real estate leasing also declined moderately and some tenants requested payment deferments. Banks reported a slight decline in overall lending
activity, but strong demand for CARES Act loans. Nonfinancial services firms reported a moderate decline in revenue
and demand. Employment continued to decline sharply in recent weeks. Wages were little changed, overall, but there
were a few reports of temporary wage increases or bonuses to keep workers on payrolls. Price growth slowed slightly
but remained at a modest pace, overall.
Employment and Wages
ture commodity prices mostly trended lower although
prices paid by food manufacturers and consumers increased for some food groups, like meat and eggs.
Overall, employment continued to decline sharply in
recent weeks. The only reports of firms hiring or looking
to hire came from high demand industries, such as food
manufacturing, logistics, cleaning services, and some
segments of retail. Also, some employers noted that
while they didn’t lay off staff, they did reduce the number of hours they worked. Others expressed difficulties
retaining or rehiring workers because they had child or
elder care responsibilities, or because it was more
financially beneficial to collect unemployment insurance. While there were few reports of permanent wage
increases, there were several reports of employers
temporarily increasing wages to retain essential on-site
staff, to match the amount employees could earn on
unemployment, or to reduce absenteeism.
Manufacturing
Manufacturers reported steep declines in shipments and
new orders since our last report. Firms also reported a
rise in cancellations of existing orders, which led to inventory build-up and a need for more storage capacity. A
meat processor reported a decline in production as some
plants shut down after employees tested positive for
COVID-19. A prepared food manufacturer reported a
decline in sales as panicked buying led customers to
purchase frozen and canned foods, but was optimistic
that people would start to transition back.
Ports and Transportation
Shipment volumes at Fifth District ports fell sharply relative to last year. Exports were hit especially hard, declining further in recent weeks from already low levels. Imports were down over the year but recovered somewhat
since our previous report as China resumed shipments.
Automotive shipments were particularly weak as manufacturers were shut down and low oil prices softened the
West African market for used vehicles. Contacts expected both imports and exports to remain low in the
coming months.
Prices
Price growth slowed slightly but overall remained modest. According to our most recent surveys, growth in
prices received by firms slowed across manufacturing
and service sectors. Conversely, growth in prices paid
rose slightly for manufacturers and increased moderately for services firms. Coal prices declined further in
recent weeks, from already low levels, while oil and gas
prices fluctuated but remained historically low. Agricul-
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Federal Reserve Bank of Richmond
Trucking companies had a moderate drop in volumes
since our previous report, and said volumes were down
significantly from a year ago. Firms lost business from
customers who were temporarily closed or faced decreased demand. Retail clothing, wine and conventionrelated shipments were especially soft. Some weakness
was also attributed to supply-chain disruptions from
overseas. Declines were partially offset by increased
shipments of food, building materials, medical and
cleaning supplies, and cardboard shipping boxes. Spot
market rates fell sharply, and some companies had to
remove trucks from the road.
Fifth District commercial real estate leasing softened
moderately in recent weeks. Landlords worked with
tenants on rent deferments. Retailers, restaurants, and
salons were especially likely to miss payments. Office
leasing was also weak, as many tenants asked for deferments, and businesses did not look for new space. Current projects continued, but speculative construction
softened. Demand for industrial leasing, on the other
hand, was high. Multifamily leasing also remained
strong, and some landlords allowed tenants to extend
leases without added fees.
Retail, Travel, and Tourism
Overall, loan activity declined slightly for this period.
Respondents indicated tepid conditions for conventional
commercial lending, but strong demand for Paycheck
Protection Program (PPP) loans. Residential mortgage
demand declined compared to the first quarter but was
higher than a year ago, while mortgage refinance lending
continued to grow moderately. Auto loans declined
sharply on a year-over-year basis. Deposit growth was
strong, mainly due to proceeds from federal aid disbursements. Overall, credit quality remains good; however, a few bankers noted an uptick in 15-30 day past due
payments and numerous requests for loan extensions,
deferrals, and mortgage forbearances.
Banking and Finance
Retail sales in the Fifth District remained low in recent
weeks and decreased greatly on a year-over-year basis.
Many retailers were required to shut down temporarily,
but were able to conduct business online or by appointment. Retailers expressed concerns about demand and
looked for ways to encourage customers to safely return
once they reopened, such as requiring and providing
masks, extending hours, and implementing measures
that allow for social distancing inside stores. Clothing
retailers struggled with a build-up of seasonal inventory
that will be hard to move in the coming months.
Travel and tourism remained extremely weak since our
last report, with sharp declines reported on a year-overyear basis. Many hotels closed temporarily and those
that were open saw low occupancy, which mainly came
from healthcare workers and construction workers.
Some contacts expected demand for tourism to come
back strong because of pent-up demand. In parts of the
Fifth District, advanced hotel bookings were up over the
year for later this summer. Restaurants struggled as
some were able to continue carry-out business, but
others had to close. As restaurants were allowed to
reopen with limited capacity, some opted to remain
closed as operating at low capacity would not be profitable.
Nonfinancial Services
On balance, nonfinancial services firms saw a moderate
decline in demand and revenues since our previous
report. Hospitals and health care service providers reported sharp declines in revenues and total volumes,
overall, because of the limitations on non-COVID-19related services such as elective surgeries. Higher education institutions in the Fifth District also reported declines in revenues, largely due to reimbursements made
to students for forgone room and board. Demand for
professional services were mixed. For example, an
accounting firms saw a modest reduction in business
while a marketing company said sales were up, although
the number of clients was down. ■
Real Estate and Construction
Fifth District home sales declined moderately since our
last report. Contracts that were underway before the
health crisis moved forward, but fewer new sales were
initiated. Inventories, which were already low, declined
as potential sellers were reluctant to list and show their
homes. There were a few reports of deals falling through
because buyers failed to qualify for a mortgage as
banks increased credit score requirements. Existing
construction projects continued, but speculative building
slowed, and contractors reported supply chain disruptions. Realtors also reported logistical challenges with
electronic and curbside closings.
For more information about District economic conditions visit:
www.richmondfed.org/research/data_analysis
E-2
Federal Reserve Bank of
Atlanta
The Beige Book ■ May 2020
Summary of Economic Activity
Sixth District business contacts reported that economic activity continued to decline from April to early May due to the
COVID-19 pandemic. Labor market activity remained weak and nonlabor costs declined overall. Retailers reported
further declines in discretionary consumer spending, although sales of essential items continued to grow; ecommerce
activity accelerated. Auto sales were subdued. Hospitality contacts noted record low revenues. Despite soft demand for
new and existing homes, inventories fell and home prices remained steady. Commercial real estate market reports were
mixed. Overall, manufacturing activity contracted and new orders declined significantly. Financial institutions reported
growth in commercial loans as businesses accessed lines of credit and the Paycheck Protection Program (PPP) and
some softness in consumer lending.
power or as a show of goodwill to troubled consumers.
The Atlanta Fed’s Business Inflation Expectations survey
showed year-over-year unit costs declining to 1.2 percent in April, as sales levels declined dramatically
“compared to normal.” Year-ahead expectations, on
average, declined to 1.4 percent.
Employment and Wages
Overall, District labor markets continued to deteriorate
from closures related to the COVID-19 pandemic and the
resulting decline in demand for products and services.
Several contacts noted they were redeploying workers
from low to high demand areas within their organization.
Many contacts reported success in securing a PPP loan,
which allowed them to avoid layoffs. Although more
furloughs and layoffs were announced, most contacts
were furloughing employees with medical benefits rather
than laying off in hopes of re-engaging them when demand returned. Several employers noted concern that
the generosity of unemployment benefits may make it
difficult to attract workers once demand improves especially among lower paid jobs. Most contacts noted that
they had frozen or slowed hiring with the notable exception of high demand sectors such as grocery and home
improvement stores.
Consumer Spending and Tourism
Similar to the last report, continued declines in discretionary consumer spending due to COVID-19 was partially offset by sales growth in grocery and household
products, office equipment, and home improvement
goods. Ecommerce activity continued to accelerate as
brick-and-mortar sales continued to decline. Reports
from businesses in locales that were cleared to reopen
indicated implementing social distancing measures and
heightened sanitation efforts. While auto sales were
muted, contacts noted that the rate of decline was slower
than expected.
Contacts noted that weaker demand resulted in more
reports of pay cuts, elimination of bonuses, and reduced
hours; these cuts were more broad based than in the
previous report. Some temporary increase in hourly
wages and bonuses continued to be reported among
high demand or essential workers, however there was
no evidence that these inducements were increasing
substantially or spreading to other sectors.
Across the District, tourism and hospitality contacts
reported that revenue per available room had reached a
historical low for April as a result of COVID-19. Most
contacts were in the process of developing their reopening strategy which would include marketing efforts and
implementation of social distancing and elevated sanitation, among other things. Firm reopen dates had not yet
been determined and the general sentiment was that the
recovery for this industry would be moderately slow.
Prices
Most contacts reported input costs decreased over the
reporting period due to the impact on demand from
COVID-19. As demand shifted from restaurants to grocers as a result of safer-at-home practices, some food
service supply chains were left with excess inventories
while others, such as meat processing and packing,
experienced shortages. However, the majority of firms
have not increased prices, either due to a lack of pricing
Construction and Real Estate
The District housing market continued to show signs of
significant disruption as a result of COVID-19. Contacts
indicated a sharp overall decline in pending home sales,
as well as a significant contraction in homes available for
sale. Mortgage financing remained constrained as many
lenders increased credit overlays. However, contacts
suggested that purchase activity improved since the
F-1
Federal Reserve Bank of Atlanta
beginning of April as more buyers sought to take advantage of low interest rates. Home prices remained
resilient as sellers maintained asking prices. Though
new home starts and sales were down sharply from a
year ago, contacts indicated that cancellations were
lower than expected and builders did not need to significantly increase incentives in order to close sales.
credit issues related to COVID-19 prompted an increase
in provisions for loan loss reserves, which significantly
lowered earnings. Loan growth accelerated for the commercial and industrial segment due to a combination of
customer drawdowns of existing lines of credit and approvals of new loans under the PPP. Both commercial
real estate and construction loan growth declined due to
weaker demand but remained positive. Residential real
estate loan growth increased due to lower interest rates
and a high level of refinancing. However, consumer loan
growth declined due to lower demand and credit standards being tightened. Increased deposits and lending
facilities created by the Federal Reserve System kept
liquidity stable.
Commercial real estate (CRE) contacts reported continuing challenges associated with the effects of COVID-19.
Reports were mixed, as rent collections exceeded low
expectations and investment activity continued to slow
during the reporting period. Contacts continued to report
a deceleration in new leasing inquiries, though leasing
activity that was already in the pipeline appeared to be
steadily continuing to move towards completion. Reports
of a greater number of tenants seeking rent relief
emerged. Declining tourism and travel conditions have
had a significant impact on CRE activity across the District. Contacts reported that capital was readily available
for financing stabilized CRE projects. Reports also indicated that accurately appraising property values has
become much more difficult and anticipate this to last
through the remainder of the year.
Energy
Oil and gas producers and servicers reported temporary
closures of wells as global demand for crude oil remained weak among historic oversupply. Utilization at
refineries and chemical manufacturers was down to
historic lows, aside from those used to make personal
protective equipment, disinfectant, sanitizer, and other
high-demand products related to COVID-19. Thus, refining and chemical manufacturing contacts reported
layoffs, spending cuts, and maintenance delays. Reports
indicated that widespread maintenance delays into the
second half of the year will create added strain on limited
maintenance contractors, staff, and equipment. Industrial
construction contractors reported extensive project delays and cancellations. While some energy contacts
expect demand to rise in late summer, many noted that
the industry will still have to contend with crude oil oversupply and storage overhang. Utilities contacts reported
decreased demand for power overall, largely from the
commercial segment.
Manufacturing
Manufacturing firms reported a decrease in overall business activity, steered by a notable decline in new orders.
To adjust to weakening demand, contacts described
lowering production levels by reducing capacity and, in
some instances, temporarily halting production at some
of their plants. Some purchasing managers indicated
they were experiencing delays in deliveries due to disruptions in supply chains. Across the board, contacts
had or planned to implement enhanced safety procedures at their plants to promote social distancing and to
provide a sanitary work environment.
Agriculture
Agricultural conditions softened. Most of the District
remained drought free, with the exception of much of
Florida, southern Louisiana, and other parts of the Gulf
coast region, which experienced abnormally dry to severe drought conditions. On a month-over-month basis,
the April production forecast for Florida's orange crop
was down from last month's forecast and last year's
production, while the grapefruit production forecast was
down from last month’s forecast but ahead of last year's
production. The USDA reported that for March, year-over
-year prices paid to farmers were up for corn, rice, eggs,
and milk but down for cotton, soybeans, cattle, and
broilers. On a month-over-month basis, prices increased
for broilers and eggs but decreased for corn, cotton, rice,
soybeans, beef, and milk. ■
Transportation
Transportation activity weakened over the reporting
period, and about half of contacts noted significant disruption to operations due to COVID-19. Air cargo companies reported further capacity reductions as more than
roughly two-thirds of worldwide passenger flights were
suspended. However, demand for air cargo services
remained robust; thus, carriers operated cargo-only
flights by using passenger aircraft to meet demand.
Railroad contacts noted continued year-over-year declines in overall traffic in petroleum and petroleum products, metals, lumber, and motor vehicles and parts.
District ports cited continued softness in container cargo.
Third-party logistic firms saw trucking volumes fall off as
panic buying of essential consumer goods subsided.
Banking and Finance
Conditions at financial institutions deteriorated slightly.
While net interest margins remained stable, emerging
For more information about District economic conditions visit:
www.frbatlanta.org/economy-matters/regional-economics
F-2
Federal Reserve Bank of
Chicago
The Beige Book ■ May 2020
Summary of Economic Activity
Economic activity in the Seventh District declined sharply in April and early May, as the spread of the coronavirus
caused major economic upheaval. Contacts were split over whether activity would decline further or pick up during the
next 3 months, and they largely expected full recovery to take more than a year. Employment, consumer spending,
business spending, construction and real estate, manufacturing, and agriculture all decreased substantially. Wages
edged up and prices were little changed. Financial conditions improved modestly.
Employment and Wages
Consumer Spending
Total employment fell dramatically over the reporting
period, with especially large declines in the retail, leisure
and hospitality, and auto industries. That said, many
contacts reported little change in employment, and a
staffing firm that primarily serves manufacturers said that
workers were beginning to return from furloughs. Many
contacts who received a Paycheck Protection Plan
(PPP) loan said that they were avoiding layoffs in order
to qualify for the loan forgiveness provision of the program. Still, a number of other contacts reported challenges in meeting the PPP loan forgiveness requirement,
with some saying that generous unemployment benefits
were making it difficult to bring payrolls back to necessary levels. Contacts again indicated they were making
major changes in work environments to protect employees against the coronavirus. Wages edged up overall,
with reports of workers at many essential businesses
receiving bonuses or raises. Benefit costs were flat.
Consumer spending again decreased sharply over the
reporting period. Nonauto retail sales declined considerably, as sellers of non-essential goods remained closed
in much of the District. Sales fell for almost all categories, with apparel, electronics, and furniture stores particularly hard hit. In contrast, grocery stores reported sizeable increases in sales, and demand for home improvement items was steady. E-commerce again saw very
large gains. Light vehicle sales were much lower, as
some dealerships remained closed. Sales picked up at
dealerships that were open, though the pace remained
well below that of a year ago. Consumption of services
remained much lower than prior to the coronavirus crisis.
Contacts in the food services, entertainment, tourism,
and recreation sectors expressed deep concern about
the upcoming summer season, noting that social distancing requirements were likely to put substantial limits on
occupancy.
Prices
Business Spending
Prices were little changed in April and early May, though
contacts expected modest price increases over the next
12 months. Both retail and producer prices were flat
overall, though grocery prices rose moderately and hotel
room rates declined substantially. Input prices were
largely unchanged, with the exception of shipping costs,
which increased some.
Business spending decreased significantly in April and
early May. Retail inventories were well above comfortable levels in most segments after sales fell dramatically,
and many contacts cancelled the bulk of their orders for
the short term. There were, however, reports of low
inventories of groceries, household products, and home
improvement products. A number of manufacturers said
G-1
Federal Reserve Bank of Chicago
that inventories were higher than desired. Capital expenditures declined, and many contacts said they were
suspending capital spending for the remainder of the
year. Contacts continued to spend to support telecommuting. Demand for transportation services decreased
moderately overall, as lower long-haul volumes outweighed increases in local delivery services. Commercial
and industrial energy consumption declined moderately,
with lower usage by retail stores, restaurants, and the
auto industry.
Banking and Finance
Financial conditions were mixed but improved modestly
on balance. Participants in the equity and bond markets
reported large gains over the previous reporting period,
though volatility remained elevated. Business loan volumes increased dramatically as banks processed a
massive number of Paycheck Protection Program applications. Demand for other loan products decreased
moderately. Quality deteriorated moderately overall, and
contacts highlighted declines for the leisure, hospitality,
dental, non-profit, agriculture, and energy sectors.
Standards again tightened moderately. Consumer loan
demand decreased moderately overall. Volumes were
lower for most categories, but remained high for mortgage refinancing. One contact said that auto loan applications were up a good deal from March, though still well
below normal levels. Loan quality again deteriorated
slightly and standards tightened slightly.
Construction and Real Estate
Construction and real estate activity decreased substantially over the reporting period. Residential construction
decreased moderately—most projects that started before
the coronavirus outbreak continued, but few new projects were started. Residential construction in Michigan
restarted in early May after being suspended in late
March, but contacts were concerned about the availability of labor, in part because many workers had left the
state during the suspension. Residential real estate
activity decreased substantially. One contact noted
heightened interest in moving out of urban areas. Home
prices fell slightly, as inventories and the number of
interested buyers both fell. Apartment owners reported
fewer rent delinquencies than they had expected and
believed generous unemployment benefits were helping.
Nonresidential construction activity decreased moderately as most existing projects continued. Commercial real
estate activity decreased significantly, with the largest
drops in the retail and hospitality sectors. Prices were
little changed, though contacts reported elevated uncertainty over how to price many properties. Rents fell modestly as vacancies and the availability of sublease space
increased modestly.
Agriculture
Agriculture incomes fell over the reporting period as
most commodity prices fell. Contacts reported disruptions in the supply chain for meats, dairy, and vegetables. The disruptions were particularly notable for meats,
as coronavirus outbreaks forced a number of packing
plants to suspend operations. Some packers restarted,
but output was substantially lower than a year ago. With
no place to deliver market-ready animals, farmers were
forced to slow herd growth (including by euthanizing
hogs). On net, the supply disruptions led to higher prices
and shortages of meat at grocery stores and restaurants,
but lower prices for cattle and hogs. Milk prices also fell,
with some producers dumping milk. Some ethanol plants
accepted corn deliveries again, but corn prices remained
low. Soybean prices also fell, but were favorable relative
to corn, resulting in some shift toward planting beans.
Planting progress was ahead of last year. Late freezes
damaged some crops, particularly fruit trees. Farmers
anticipated government programs would help during the
downturn, but observers expected some distressed
farms to be forced to liquidate. ■
Manufacturing
Manufacturing production decreased substantially in
April and early May. Auto production was very low as
many assemblers and suppliers remained shut down.
While many automakers in the US planned to resume
production in the middle of May, there was concern over
supply chains due to uncertainty about when factories in
Mexico would reopen. Steel production declined precipitously, driven by large declines in autos and oil and gas.
Demand for specialty metals decreased moderately, as
reduced orders from autos and aerospace outweighed
slight increases from the medical and defense industries.
Orders for heavy trucks continued to decline from their
peak last year. Manufacturers of building materials saw a
modest decrease in shipments, while manufacturers of
packaging materials reported a large increase in demand.
For more information about District economic conditions visit:
chicagofed.org/cfsbc
G-2
Federal Reserve Bank of
St. Louis
The Beige Book ■ May 2020
Summary of Economic Activity
Economic conditions have declined since mid-April, but at a moderately slower pace. While a very small fraction of firms
had closed permanently, around half of firms remain closed temporarily. Among the firms that are closed, about onethird expect to reopen in the next 3 weeks, one-quarter in the next 3 to 5 weeks, one-quarter in the next 5 to 10 weeks,
and the remainder in more than 10 weeks. Firms that are reopening are often doing so for training and preparation
purposes; less than one-fifth expect demand for their products or services to pick up in the next 5 weeks. Contacts’
general outlook for regional economic growth during the remainder of 2020 is pessimistic, as about two-thirds of contacts expect growth to be slower than the same period in 2019.
quarter relative to the same time last year. Nonlabor
costs to businesses were generally unchanged, but
some sectors did report significant increases: Wholesale,
healthcare, and construction industries reported large
net increases in nonlabor input costs. The healthcare
industry in particular remains concerned about heightened prices for personal protective equipment because
demand for these products has increased as other firms
begin to reopen.
Employment and Wages
Labor markets have continued to decline sharply over
the reporting period, although the pace of decline has
slowed considerably, with some contacts attributing
employment stability to PPP funding. A payroll contact
reported that new layoffs were driven predominantly by
small firms, though many large employers have also
furloughed workers since March—notably, several
healthcare systems. Contacts reported that reopening
firms were limited by labor shortages, which they ascribed to increased unemployment benefits, personal
health concerns, and childcare responsibilities leading
potential workers to stay home.
Consumer Spending
Consumer spending activity has been mixed but remains
at historic lows. There have been slight upticks in activity
for auto dealers and hotels in recent weeks. A furniture
retailer expects to reopen in the coming weeks and
expects that demand will pick up in the next month. A
jeweler does not expect demand to pick up for another
two months or longer and may not reopen. Hospitality
contacts continue to report low or no activity throughout
April. Tourism venues expect to remain closed for the
next two months or longer.
Wages and other benefits were lower than in our previous report; a payroll company reported a “second wave”
of wage cuts, and reports across industries have mentioned cuts to benefits, including employer 401k matching. Some companies, especially those in competitive
fields, have promised to repay lost wages at the end of
the crisis; and others have increased wages to maintain
morale and lure back hesitant workers.
Auto dealers reported mixed activity over the past
month. Some contacts cited stay-at-home orders and
lack of inventory as reasons for low sales, while others
reported that current-quarter sales are about the same
as they were this time last year, noting that stimulus
money and financing deals have helped bolster sales.
Prices
Price pressures have decreased modestly since the
previous report. On net, 16% of contacts reported that
prices charged to consumers were lower in the second
H-1
Federal Reserve Bank of St. Louis
Some dealers reported that demand has already picked
up since the shutdown, while others anticipate it will take
two months or longer to see an upward trend in demand.
A majority of contacts reported lower new residential
construction demand compared with the previous year. A
contact in Memphis reported few new projects in the
pipeline. Contacts in Louisville and St. Louis reported
that homebuilding remained stable in April because of
the continuation of in-progress projects.
Manufacturing
Reports from manufacturing contacts were mixed. However, levels of production remain very low. A steel manufacturer reported a 30% reduction in production, and a
machine products manufacturer reported a 50% reduction in production. Both these contacts cited reduced
demand as their biggest impediment. A printing company
reported sharp increases in production from 15% to 80%
of normal levels. Furthermore, several auto plants in the
region have reopened or plan to reopen within a couple
of weeks, but are working at 25% to 50% of normal
production levels with supply chain disruptions.
Commercial real estate activity has moderately decreased since March. All contacts surveyed reported
lower demand for retail space relative to the previous
year. Contacts reported little change in the demand for
industrial space and a moderate decrease in demand for
office space. Some contacts expressed that despite
sharp drops in the retail side of their business, continued
industrial demand has been a bright spot for their firms.
Contacts reported only a slight decline in rent collections.
Contacts reported clients have suspended or delayed
commercial construction projects. Contacts also reported
difficulties with the construction process due to supply
chain issues and increased safety costs.
Nonfinancial Services
Activity in the nonfinancial services sector has worsened
moderately since the previous report. On net, about onethird of contacts expect that it will take more than 10
weeks for demand for services to begin to improve.
Contacts in the healthcare sector reported severe drops
in non-COVID-19 patient visits, by as much as 50%
since March. Elective surgeries have been postponed by
hospitals. Contacts reported furloughing between 5% to
33% of their workforce. Contacts in primary care note the
use of telehealth to replace some, but not all, patient
visits.
Banking and Finance
Banking conditions in the District have declined slightly
after a surge in demand for emergency loans in April.
Contacts reported the pipeline for PPP loans is now
manageable. Demand for most consumer loans declined
moderately, with the exception of credit cards loans,
which modestly increased. Banks indicated a sharp
increase in delinquencies, primarily in mortgages, credit
cards, and auto loans; but they expect fewer delinquencies in the third quarter. Louisville area bankers reported
increasing loan loss reserves.
In the transportation industry, passenger activity in airports is significantly lower but has ticked up slightly in
recent weeks. Contacts noted a 95% drop year over year
in passenger traffic. Airports have been able to remain
open by making use of their cash reserves and relief
funding from the CARES Act, by postponing capital
expenditures, and with increases in cargo traffic. Contacts in logistics and freight noted mixed activity. Contacts linked to foodstuffs and online shopping noted
increased activity, while contacts linked to retail trade
and other sectors noted a drop in activity since the previous report.
Agriculture and Natural Resources
District agriculture conditions have been mixed since
April. Contacts reported that transportation and warehousing costs have increased and supply chain issues
are affecting many producers. Smaller meat processing
plants experiencing higher demand due to closures of
larger plants are constrained by regulatory requirements.
Contacts reported significant variation in revenue as
some industries such as rice producers have seen increased demand and prices for their goods. Meanwhile,
cotton and other row crop producers reported lessened
demand and continued low commodity prices, making
profitability a challenge. Planting has increased since the
previous reporting period and is up modestly from this
time in 2019. However, this is largely due to improvements in states that experienced historic flooding in
2019. ■
Real Estate and Construction
Residential real estate activity sharply declined in April
as measured by existing home sales, new listings, and
pending sales. Contacts reported drops in home sales
between 8% and 50% in April relative to one year ago,
despite sales conditions being generally unaffected by
COVID-19 in March. Some brokers indicated that they
have already experienced an uptick to near-normal
sales. Home showings have rebounded from their lows
in late March and early April. Inventory levels have decreased about 20% from the same time last year.
For more information about District economic conditions, visit:
https://research.stlouisfed.org/regecon/
H-2
Federal Reserve Bank of
Minneapolis
The Beige Book ■ May 2020
Summary of Economic Activity
Ninth District economic activity declined further after falling substantially in the previous report due to the COVID-19
pandemic and response. Employment fell significantly, and wage pressures fell overall due to the steep decline in activity, while price pressures remained modest on balance. The District economy saw declines in consumer spending, tourism, services, construction and real estate, manufacturing, energy, mining, and agriculture .
Employment and Wages
wages cuts over the coming three months. Firms in
Minnesota had a higher incidence of wage cuts, while
firms in the Dakotas saw a notably lower share. A
Minnesota manufacturer cut wages by almost 4 percent
for most workers, with senior management and
managers taking pay cuts of 10 percent to 20 percent.
Employment fell significantly since the last report. Two
surveys in May by the Minneapolis Fed found that April
employment fell among a significant number of firms,
and many expected additional staffing cuts by the end of
the month. Although initial unemployment claims have
fallen significantly in recent weeks, they remain much
higher than normal levels. Mass layoff events have
slowed after a deluge in April. For example, there were
more than 60 mass layoff announcements in Wisconsin
in April, many involving multiple locations. Through midMay, there have been only a handful of such
announcements. Mass layoffs in Minnesota have
followed a similar pattern. April job postings fell steeply
in Minnesota and North Dakota. However, states that
track job postings every week are showing evidence of a
recent bounce-back. After dropping from mid-March
through mid-April, job postings in South Dakota and
Montana jumped significantly in late April and early May.
Seasonal hiring has resumed with the gradual lifting of
operational restrictions facing some businesses, but at a
much lower level than normal. A Montana firm that
normally hired 4,000 summer employees reported that it
expected only about 1,000 this year. Ironically, staffing
firms with job orders reported difficulty finding workers.
Prices
Price pressures decreased on balance. Trucking firms
reported that freight rates have fallen, in many cases
dramatically, due to a contraction in demand for
shipping. North Dakota crude oil prices as of mid-May
were down 50 percent from their levels a month earlier.
However, retail fuel prices in District states ticked up in
recent weeks after declining in April and were roughly
unchanged as of mid-May relative to the previous report.
Manufacturing contacts continued to report that prices
for raw material inputs were stable; however, a beverage
bottler reported concerns that supply chain disruptions
for plastic and aluminum would feed through to container
prices. Recent spot prices for livestock and dairy have
fallen precipitously, and restaurant and institutional food
service shutdowns have roiled the agricultural supply
chain.
Consumer Spending
Consumer spending declined significantly since the last
report due to shelter-in-place guidelines and other
factors that limited normal activities. Multiple surveys
have shown steep revenue declines at restaurants, bars,
Wage pressures fell due to the steep decline in overall
activity. A Districtwide survey of firms found that more
than one-quarter have implemented some level of wage
cuts, and a similar share of firms expected additional
I-1
Federal Reserve Bank of Minneapolis
lodging, and retail establishments. A survey in late April
found that one-third of Minnesota tourism firms reported
no revenue over the past 30 days. Hotel occupancy in
Minneapolis-St. Paul has hovered around or below 20
percent for the past two months. Hotel bookings in
Montana were also reported to be very low in April and
May. Consumer spending conditions appeared to be less
severe in the Dakotas, where businesses faced fewer
operating restrictions. Nonetheless, South Dakota
tourism tax receipts were down by almost 30 percent in
April. There were modest signs of uptick—from very low
levels—in some consumer spending areas. For example,
vehicle titles and liens registered in Wisconsin have risen
for four consecutive weeks. TSA screenings at airports
Districtwide were showing small improvements after a
freefall in passenger activity. Some hotels in Montana
and other high-tourism areas reported improvements in
reservations toward the end of June and into July.
Activity at restaurants and other consumer-facing
businesses was also returning slowly in May as District
states lifted restrictions at varying rates.
larger markets, with Minneapolis-St. Paul, Sioux Falls,
S.D., and Bismarck and Fargo, N.D., all seeing healthy
growth in April permits compared with a year earlier.
Commercial real estate activity fell since the last report.
Slower economic activity was negatively affecting all real
estate categories, but particularly retail and office space.
Vacancy rates were expected to increase across the
board as leasing activity slowed. Among industry
subsectors, industrial space was reported to be faring
the best, in part because of increased e-commerce
demand for warehouse space, both currently and going
forward. Rent collections were “top of mind,” among
contacts. A multifamily property manager reported that
rent delinquencies were elevated in May, but by less
than expected, and reflected an improvement over April
levels. Residential real estate was mixed. Home sales in
Minnesota rose 1 percent in April over a year earlier.
Sales elsewhere over this period were higher in northern
Wisconsin, Fargo, Sioux Falls, and Great Falls, Mont.,
but lower in western Wisconsin, Grand Forks, N.D., and
Missoula and Bozeman, Mont.
Services
Manufacturing
Activity in the services sector decreased. In a recent
survey of Ninth District businesses, 75 percent of
professional services firms reported decreased sales in
April relative to a year earlier. A railroad reported that
total April volumes were down more than 20 percent
from a year earlier. A strong majority of trucking firms
reported that sales decreased by 25 percent or more in
April relative to a year earlier; expectations for May
activity were slightly positive compared with April, but
substantially down from May 2019. In contrast, a contact
in the Great Lakes maritime shipping industry reported
that orders remained strong.
Manufacturing activity decreased further. An index of
manufacturing conditions indicated substantially
decreased activity in April compared with a month earlier
in Minnesota and the Dakotas; employment contracted
sharply. Three in five manufacturers responding to a
survey of District firms reported decreases in sales by 25
percent or more in April compared with a year earlier.
Suppliers of inputs to the oil and gas industry reported a
severe contraction in demand.
Agriculture, Energy and Natural Resources
District agricultural conditions worsened. Reports
continued to surface of producers euthanizing animals or
placing them on restrictive diets due to pandemic-related
closure of livestock slaughter plants. More than twothirds of Ninth District agricultural lenders reported that
farm incomes decreased in the previous three months
relative to a year earlier, with a similar share reporting
decreased capital spending, according to the
Minneapolis Fed’s first-quarter (April) survey of
agricultural credit conditions. Oil and gas activity, already
in decline prior to the pandemic, contracted severely as
demand fell. The number of active drilling rigs in the
District as of early May was less than half the level
during the previous reporting period. Multiple District iron
ore production facilities shut down operations as
domestic steel production declined. ■
Construction and Real Estate
Commercial construction fell since the last report. An
industry tracker of construction projects showed a
modest dip in activity in April and early May. But other
sources suggested a bigger decline. More than two of
three respondents to a mid-May survey of Minnesota
construction firms said they have had recent or future
projects canceled, and an even higher share have seen
other projects delayed. Respondents also reported a
reduced number of new projects out for bid. Some major
projects also moved forward, including a $1 billion
project to reconstruct shipping locks on the eastern edge
of Lake Superior. Residential construction was lower, but
showed some positive signs. The aforementioned survey
suggested that many Minnesota housing contractors
were seeing project delays. At the same time, singlefamily permitting remained active in many of the District’s
I-2
Federal Reserve Bank of
Kansas City
The Beige Book ■ May 2020
Summary of Economic Activity
Tenth District economic activity declined substantially since the previous survey, and contacts remained pessimistic about
activity levels in the months ahead despite some easing of restrictions related to COVID-19. Consumer spending decreased at a faster pace in April and early May, with particularly weak sales at auto, restaurant, tourism and healthcare
establishments. Manufacturers reported a record drop in activity as production plunged at both durable and non-durable
goods plants in April. Transportation, wholesale trade, and professional and high-tech services contacts also reported
lower sales, and additional declines were anticipated in the months ahead. Residential and commercial real estate activity
dropped significantly, and construction activity fell at a modest pace. Energy activity declined further as firms announced
well shut-ins to lower oil production. The agriculture sector also weakened further as disruptions at meat-packing plants
worsened and cattle and corn prices declined sharply. District employment fell sharply over the past two months, but the
pace of job losses moderated some in the last couple of weeks. Wages fell modestly, and input and selling prices declined across most District sectors.
Employment and Wages
expected a slight drop in prices going forward. Manufacturers reported slightly lower prices for both finished
products and raw materials prices, but expected prices
to pick up slightly in the coming months.
District employment and employee hours were down
moderately compared to the prior survey period and
were substantially below year-ago levels. After a dramatic spike in initial claims for unemployment insurance
in late March and April, the number of new claims declined in recent weeks but remained historically high.
However, contacts in all sectors, with the exception of
retail trade and real estate, expected continued declines
in employment over the next few months, albeit at a
more moderate pace.
Consumer Spending
Consumer spending decreased at a steeper pace since
the last survey period as regional businesses continued
to be negatively affected by COVID-19. Sales declined
further in auto, restaurant, and tourism sectors, and most
grocers and pharmacies reported some decline since the
last survey as well. Activity remained low for District
health services, with fewer sales and fewer hours, while
input prices were higher than a year ago. Auto sales
were down for all contacts compared with a year ago,
and contacts expected inventory levels to expand further
due to low sales expectations in the near term. Compared with the previous survey and a year ago, restaurant sales and employment levels contracted sharply.
The hotel and tourism sector experienced steep losses
due to COVID-19 shutdowns of non-essential businesses. Nearly all firms reported taking measures to cover
shortfalls in revenues experienced as a result of the
COVID-19 pandemic, and over two-thirds applied for the
SBA PPP loan program. Expectations for future consumer activity improved only slightly compared with the
previous survey period, and remained historically low.
A majority of respondents continued to report no labor
shortages, but some contacts did note difficulties finding
truck drivers and hourly food-service workers. Wages fell
modestly, but slight gains were expected in the coming
months.
Prices
Input and selling prices declined across most District
sectors in April. However, retail trade contacts noted
modest growth in both input and selling prices. Input and
selling prices declined slightly in the restaurant sector,
but were expected to rise moderately in the next few
months. Transportation contacts reported moderately
lower input and selling prices and expected both to fall
further in the months ahead. Construction supply respondents noted a moderate decline in selling prices and
J-1
Federal Reserve Bank of Kansas City
Manufacturing and Other Business Activity
across most loan categories. Bankers indicated a sharp
decrease in the demand for consumer loans and commercial real estate loans, while reporting a modest decrease in agriculture loans and a slight decrease in
commercial and industrial loans. By contrast, bankers
noted a slight increase in residential real estate loan
demand. Loan quality declined moderately from a year
ago and was anticipated to decrease significantly over
the next six months. Bankers continue to carefully monitor the effects of COVID-19 on the local economy.
Manufacturing activity fell at a record pace in April as
COVID-19 continued to weigh on firms. The decrease in
manufacturing activity was steepest at durable goods
factories such as primary and fabricated metals, but
activity at non-durable goods plants including food and
beverage manufacturing also declined. Production, new
orders, employment, and raw materials inventories all
dropped further compared to the previous survey period
and year-ago levels. On the other hand, supplier delivery
time increased. More than two-thirds of factory contacts
reported applying for SBA PPP loans. However, a number of firms had not received funds by late April. Expectations for future activity rose compared to the last survey period, but remained slightly negative.
Energy
Energy activity collapsed further since the previous
survey, and expectations for future drilling and business
activity remained negative. Revenues decreased and
capital spending plans declined. The number of active oil
and gas rigs in the District fell dramatically to historic
lows as firms announced well shut-ins to ease production levels. The sharp drop in demand for energy production due to the global pandemic continued to weigh on
the outlook for energy activity. Low oil and gas prices
also remained an issue for District firms, negatively
impacting profitability. Most firms did not expect energy
price levels to pick up significantly in the near term, and
expectations for rig counts and employment levels remained subdued.
Outside of manufacturing, sales decreased for firms in
the transportation sector, and several firms reported
layoffs and increased use of paid time off for employees
since the previous survey period. Recent sales declined
for wholesale trade, but remained around year-ago levels. Sales were also down for professional and high-tech
services sectors in April and were below year-ago levels.
Expectations in the transportation, wholesale trade, and
professional and high-tech services sectors remained
very negative, as firms anticipated significantly lower
sales, employment levels, capital expenditures, and
prices in coming months.
Agriculture
The farm economy in the Tenth District weakened further
alongside developments related to COVID-19. As of the
second week of May, roughly a quarter of U.S. meatpacking and food processing plants with confirmed
COVID-19 cases were located in the District. As disruptions in meat and food supply chains worsened and a
substantial slowdown in ethanol production continued,
cattle and corn prices declined sharply through early
May. Alongside significant reductions in demand for corn
used in ethanol, corn supply also was forecasted to be
the largest on record in 2020. Contacts reported that
weak market conditions likely will have major implications for producer cash flows in coming months. Despite
a more pessimistic environment, farmland values in the
region remained relatively steady. ■
Real Estate and Construction
Residential and commercial real estate activity declined
substantially since the previous survey, while construction activity fell modestly. Residential sales decreased
sharply as stay-at-home orders reduced buyer traffic.
New listings also fell significantly, and inventories were
well below year-ago levels. Despite a decline in activity,
home prices held steady and remained above year-ago
levels. Home showings increased significantly over the
past couple of weeks as restrictions eased, and residential real estate activity is expected to pick up modestly in
the coming months. Residential and commercial construction activity declined modestly, and construction
supply firms noted a slight increase in sales due to a pick
-up in home improvement projects. Commercial real
estate conditions deteriorated as vacancy rates increased, while absorption and sales declined. Access to
credit was more difficult than last year, and overall commercial real estate activity was projected to worsen
significantly in the next few months.
Banking
Since the last survey, loan demand continued to decline
modestly and credit standards increased somewhat
For more information about District economic conditions visit:
www.KansasCityFed.org/Research/RegionalEconomy
J-2
Federal Reserve Bank of
Dallas
The Beige Book ■ May 2020
Summary of Economic Activity
Eleventh District economic activity contracted sharply in April, while preliminary data from May point to a notable easing
in the pace of decline as restrictions on businesses were gradually lifted. Activity in the energy and service sectors
remained the hardest hit. Manufacturing output and new orders fell further, though food manufacturing continued to
increase. Loan volumes contracted broadly, with the exception of residential mortgages and SBA’s PPP funds. Home
sales fell sharply from mid-March through mid-April but have been improving from low levels since then. Employment
and hours worked continued to plummet, pressuring wages. While input costs were flat to slightly up, food processors
noted a large increase in meat prices. Selling prices dipped further. Preliminary results from a May Dallas Fed Survey of
Texas manufacturing and service firms indicated that current revenue levels for most respondents were down markedly
compared with a typical May, and about a fifth said they would not be able to survive past six months if revenues did not
improve. Outlooks remained weak due to uncertainty surrounding the pace and scope of the reopening of the District
economy.
Employment and Wages
Prices
Employment declines were steep, spanning all metros
and most industries. An April Dallas Fed survey of 400
Texas businesses in the services and manufacturing
sectors showed that 47 percent of respondents had
either temporarily or permanently laid off workers and 63
percent had cut hours. Energy contacts said oilfield
workers were being furloughed or laid off in tandem with
declining activity, and cuts were also widespread at
corporate offices. A large rail firm said they have furloughed about 5,000 workers due to decreased traffic,
and there were a few reports of employment cuts in real
estate and construction. In contrast, a food manufacturer
noted difficulty finding workers and a few finance firms
said they were adding employees or using overtime to
process PPP loans. Some companies said PPP funding
had helped them hold on to employees.
Input costs were flat to slightly up except for meat processing, where contacts noted significant upward price
pressures. Weak demand for most products and services further depressed selling prices, though there were
reports of rising costs of PPE and related supplies.
Some firms noted making cost reductions to conserve
cash. Airlines reported further discounting of tickets. Rail
shipment rates for some commodities rose, but pricing
for most others dipped. New home prices were flat
though realtor bonuses and incentives were being offered. Staffing firms reported no change in bill rates.
Manufacturing
Output declines steepened in April, but preliminary data
suggest that the pace of contraction slowed markedly in
May. Declines spanned durables and nondurables, but
manufacturers of transportation equipment and those
tied to the oil and gas sector were among the hardest hit.
Refinery utilization rates fell to 70 percent in April, well
below the normal run rate of over 90 percent. Margins
remained depressed and petrochemical manufacturers
noted deferring maintenance and/or delaying construction projects to preserve capital. Only food manufacturers continued to cite growing demand. Overall outlooks
remained starkly negative due to heightened uncertainty
surrounding return to normalcy and post-pandemic con-
Firms that were beginning to call workers back said that
fear of infection, lack of childcare, and generous unemployment insurance (UI) benefits were preventing some
workers from returning. A few staffing firms noted difficulty recruiting due to increased UI benefits. Wages were
flat to down, with auto dealers and energy firms among
others noting reduced benefits and pay.
K-1
Federal Reserve Bank of Dallas
sumer demand.
had increased. Office leasing activity slowed, particularly
in Houston. Investment sales were sluggish and capital
for new development has mostly dried up as investors
take a wait-and-see approach.
Retail Sales
Retail sales dipped further due to business closures and
overall weak demand, with only a handful of contacts
noting an improvement from low levels. Several firms
also mentioned the weakness in the oil and gas industry
as a headwind. Auto sales plunged in April and remained
sluggish in early May, though some dealers noted a
pickup in demand. Outlooks remained bleak and uncertain, mainly centered on the speed and extent of the
recovery.
Financial Services
Loan volumes contracted broadly, with the exception of
PPP and residential real estate loans. Loan pricing continued its marked decline, and credit standards tightened
considerably. Loan performance eroded across all loan
types, and 83 percent of respondents expected further
deterioration. Well over a third of bankers observed
increased use of existing lines of credit due to COVID19, up from 25 percent last period. On average, bankers
said 13 percent of their clients were receiving loan payment deferrals. A majority of respondents have made
SBA PPP loans to businesses, and most cited administrative or technology related challenges in processing
and/or distributing PPP funds. Outlooks remained negative.
Nonfinancial Services
Activity in the service sector remained depressed,
though the rate of decline appeared to moderate in May
relative to April. A few firms that cited rising revenues
noted strong backlogs, increased demand stemming
from the current economic distress, or a pickup in demand from a very weak April. Firms noting continued
weakness generally reported low levels of demand,
particularly in travel, accommodation, and food services.
Among restaurants, those with no drive-thru infrastructure were the most impacted. Airlines said passenger
demand was flat during the reporting period; however, it
is down 90 percent compared to year ago levels. Domestic travel was mainly limited to essential workers,
while overseas traffic largely consisted of cargo. Rail, air,
and sea cargo volumes decreased year-over-year as
well as during the reporting period. Staffing firms saw a
drop off in orders, though there were reports of increased demand for workers in healthcare, nursing,
logistics, and trucking. Service sector outlooks were
largely pessimistic.
Energy
Eleventh District drilling and completion activity fell to
record lows during the reporting period as depressed
prices and storage constraints forced many firms to shutin production. Smaller exploration & production firms
reported idling most of their fracking crews and larger
firms said they have been idling about half of them.
Bankruptcies are expected to spike due to ongoing funding constraints. Contacts indicated that activity may be
nearing a bottom, but recovery will likely be slow due to
expectations of low crude oil prices through 2021.
Agriculture
Soil moisture levels remained favorable across most of
the district, except for South Texas where there was
drought. Wheat remained a bright spot with higher prices, strong demand, and solid yield prospects. Prices fell
for other grain crops, particularly corn, due to declining
ethanol demand. Contacts noted some concern for 2020
revenues in part due to lower grain prices. Reduced
meat processing capacity due to social distancing
measures and plant closures translated into lower demand and prices for cattle, even as beef prices soared. ■
Construction and Real Estate
Existing-home sales fell sharply in April and listings were
down as well. New home sales plummeted from midMarch to mid-April but have been rising since then partly
due to low mortgage rates. Despite the pickup, sales are
generally running below plan. Home showings are either
virtual or by appointment. Builders said cancellations
have slowed in recent weeks from the highs seen in late
March and early April. Some supply chain issues were
noted due to plant closures. Several new land and lot
deals were cancelled or on pause, spec building has
slowed, and existing lot contracts were being renegotiated due to heightened uncertainty and the need to preserve cash. Outlooks remained weak, though they have
improved slightly in recent weeks.
Multifamily contacts said rent collections in April and
early May were ahead of expectations. Leasing activity
was sluggish but was picking up, and rent concessions
For more information about District economic conditions visit:
www.dallasfed.org/research/texas
K-2
Federal Reserve Bank of
San Francisco
The Beige Book ■ May 2020
Summary of Economic Activity
Economic activity in the Twelfth District contracted markedly during the reporting period of April through mid-May. Most
businesses reported dramatic employment declines, due to disruptions related to the COVID-19 outbreak. Changes in
wages were mixed. Price inflation was generally muted with exceptions in a few sectors. Sales of retail goods declined
sharply, and activity for providers of consumer and business services contracted noticeably. Manufacturing contracted
moderately, and activity in the agriculture sector slowed further. Conditions in residential real estate were mixed, while
the commercial market showed a notable decline in activity. Lending activity increased moderately, fueled by Paycheck
Protection Program (PPP) loans.
Employment and Wages
offering hazard pay bonuses to 87 percent of its workforce.
Business disruptions related to the COVID-19 outbreak
caused a surge in layoffs and furloughs over the reporting period. Many nonessential businesses reported
double-digit percent reductions in their employment
levels as well as cancelled hiring plans. Businesses in
the entertainment, food services, retail, and tourism
sectors were among the more severely affected. A large
specialty retailer laid off or furloughed 85 percent of its
employees. Conversely, some banks either maintained
or increased hiring levels to accommodate increased
demand for PPP loans. Some customer-facing essential
businesses mentioned that some separations came at
the request of employees who were afraid of contracting
the coronavirus. Other contacts noted that some workers’ current ability to receive more income through unemployment insurance and other social programs than
through employment has hindered employee retention
and rehiring efforts. Contacts across the District reported
cutting workers’ hours. Work arrangements became
more flexible where possible, including teleworking and
expanded leave periods. A banker in Central California
recorded increases in worker absences of up to 10 percent primarily due to a lack of available childcare. A
payment processing firm reported that job applications
for current openings soared, though many candidates
did not have the stated requirements.
Wages declined at some firms, but many reported no
changes in hourly rates or salaries. A Southern California hotel reduced workers’ pay by up to 40 percent.
Building materials manufacturers and transportation
providers either suspended or postponed bonuses, merit
increases, and cost-of-living adjustments. Some small
businesses said that PPP loans helped them maintain
their wages at current levels. A Seattle firm reported
Prices
Most contacts reported stable prices over the reporting
period. Uncertainty about the timing of a rebound in
activity inhibited price movement overall. However, prices for building materials increased modestly on balance
with new construction projects restarting near the end of
April in some areas. Hard-to-find products at grocery
stores also showed some price increases. In contrast,
contacts noted lower prices at gas pumps and heavy
discounting at restaurants and hotels. Steel prices declined sharply due to a slowdown in auto manufacturing.
Widespread closures at processing facilities generated
oversupplies of livestock and dairy inputs and decreases
in prices paid to farmers.
Retail Trade and Services
L-1
Retail sales across a variety of sectors fell by doubledigit percentages in general as nonessential brick-andmortar stores largely remained closed. Sales of many
consumer goods have shifted heavily to online platforms,
including footwear, pet care products, and seasonal
merchandise. Online sales partially attenuated the impact of sharply reduced in-person sales. Big box retailers
that remained open faced supply chain disruptions for
some goods including paper and cleaning products.
Demand for certain specialty home products such as doit-yourself home improvement supplies and gardening
materials remained stable or even increased. Auto dealers in the Mountain West reported a sales pickup in late
April and early May compared with prior weeks, especially for larger vehicles such as trucks and SUVs,
though inventory remained tight.
Federal Reserve Bank of San Francisco
Activity in consumer and business services contracted
noticeably. Transportation fell moderately with the exception of residential delivery services. Restaurants
remained closed apart from those able to offer take-out
alternatives. Hotels, sports venues, in-person educational institutions, daycare centers, and movie theaters
remained largely nonoperational. Spending on most
discretionary medical services halted, but demand for
mental health and veterinary services remained robust.
In the Pacific Northwest, consumers avoided cash heavy
expenditures such as auto repair services. A contact in
the Pacific Northwest also warned of reduced local government revenue collection and its implication for potential cuts in fiscal spending and public services. In the
entertainment sector, demand for broadcasting and
voice-over services increased.
downs in the entertainment and restaurant sectors
abroad hit exports of nuts and raisins. Energy producers
saw steep declines in industrial and commercial demand, but rapid increases in residential usage. Timber
loggers witnessed some additional demand from Asian
markets facing reduced supply from other western countries.
Real Estate and Construction
Residential construction activity was mixed on net. After
a temporary halt in construction, residential projects
restarted in some areas in late April or early May, depending on local social distancing relaxation schedules.
Overall, home sales slowed dramatically and inventories
decreased as sellers held back amid in-person home
tour restrictions. Nonetheless, a few local markets in
California and Idaho continued to see strong home
sales, especially within higher price ranges. Uncertainty
around future construction and sales remained high. A
contact in Southern California mentioned that residential
rent prices were flat or even down slightly as tenants
sought and gained payment concessions.
Manufacturing
Manufacturing activity declined moderately. Reduced
global industrial activity negatively impacted sales, availability of raw materials, distribution networks, and capacity utilization. Demand for finished steel products decreased significantly, driven primarily by a suspension in
auto production and lower demand from energy producers. A large metal manufacturer in the Pacific Northwest
mentioned that capacity utilization is now below the longterm U.S. average. Manufacturers of building products
saw reduced sales and limited production schedules,
though one producer observed a pickup in demand as
construction sites reopened in late April in some areas.
Renewable energy machinery manufacturers cut their
domestic production by up to half following health and
safety concerns for their workers. Fruit, meat, and dairy
producers across the District faced supply chain disruptions and production bottlenecks following the closure of
many processing and packing facilities.
Commercial construction activity declined notably
throughout the District. Reports highlighted that weak
business prospects for restaurants, hotels, and other
commercial venues have severely depressed commercial construction and permitting across a large portion of
the District. One contact in Idaho emphasized that commercial projects were only postponed, as opposed to
terminated, mostly due to delays in the delivery of building materials.
Financial Institutions
Agriculture and Resource-Related Industries
Activity in the agriculture sector slowed further over the
reporting period. Domestic demand from the commercial
food sector continued to be just a fraction of what it was
before the COVID-19 shock. Potato and barley growers
in Idaho faced reduced sales to distributors who had
retained leftover inventory from the previous season.
Fruit growers in California saw some increased demand
from food banks, social service providers, and governmental programs, but, a decline overall in domestic
demand. Timber producers in the Pacific Northwest also
saw a pullback in domestic demand for logs due to the
slowdown in manufacturing activity. On the supply side,
some producers in Idaho and Arizona have reduced live
animal herd sizes in response to bottlenecks at meat
processing plants. Agricultural export markets were
similarly downbeat. Milk exports declined notably. Slow-
L-2
Overall lending activity increased moderately, fueled by
PPP loans. Financiers reported that, outside of PPP
loans, the level of regular commercial loan origination fell
modestly as firms focused instead on drawing down
preexisting lines of credit and applying for loans through
the federal relief program. Contacts noted that banks’
participation in the federal program has increased,
though uncertain guidelines have discouraged engagement in the program somewhat. Some banks continued
to offer PPP loans to existing customers only. Reports
mentioned that loan repayment deferral requests continued to soar. Credit quality remained generally stable
though. A banker in Central California did record increased loan write-offs. Refinancing activity for residential mortgages was robust following a decrease in interest rates. Even though application requirements tightened, credit remained widely available for first mortgages and refinances in most areas within the District. Venture capitalists reported they were scrutinizing start-up
financing more strictly both for new investment and
continued funding. ■
Cite this document
Federal Reserve (2020, June 9). Beige Book. Beige Book, Federal Reserve. https://whenthefedspeaks.com/doc/beige_book_20200610
@misc{wtfs_beige_book_20200610,
author = {Federal Reserve},
title = {Beige Book},
year = {2020},
month = {Jun},
howpublished = {Beige Book, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/beige_book_20200610},
note = {Retrieved via When the Fed Speaks corpus}
}