Fed's Beige Book reports signs of tepid recovery by early July

Carla Harmon
July 16, 2020

US stock benchmarks added to gains Tuesday afternoon after Federal Reserve Gov. Lael Brainard painted a grim outlook for the economy facing the COVID-19 pandemic, but said she advocated for policy that would stimulate the virus-beaten business sector. "The recent resurgence in COVID cases is a sober reminder that the pandemic remains the key driver of the economy's course", she said.

Fed Governor Lael Brainard pointed to a highly uncertain economic outlook in a speech on Tuesday, saying the central bank should turn its focus to providing accommodative monetary policy over the longer term.

Most districts reported that manufacturing activity moved up, but from a very low level.

Employment increased on net in nearly all districts as many businesses reopened or increased activity, specifically with gains in retail, leisure, and hospitality sectors; payrolls, though, were still under pre-pandemic levels.


The beige book survey was conducted before July 6.

- Can they avoid layoffs? "Payroll employment rebounded strongly in May and June", said Brainard. But ongoing spikes in viral infections across most of the United States could lead reverse much of that progress.

Here's one observation that implies it will take awhile for the economy to come back - "Contacts in almost every district noted difficulty in bringing back workers because of health and safety concerns, childcare needs, and generous unemployment insurance benefits", according to the report.

The Fed has since March slashed interest rates to near zero, ramped up large-scale asset purchases and launched numerous other crisis programmes created to grease the U.S. financial system and funnel credit to households and businesses.


Monthly data reports have offered promising signs of at least a temporary recovery, including the New York Fed's manufacturing index released Wednesday that posted its first positive reading since February.

"Loan demand was flat outside of some Paycheck Protection Program (PPP) activity and increased residential mortgages".

Ian Shepherdson of Pantheon Macroeconomics said that while the figures were encouraging, "We expect slower progress over the next few months, given abundant evidence that the broad economy has slowed over the past year".

Mining, including oil and gas production, fell 2.9 percent in the month and declined 42.7 percent in the quarter.


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