Fed: The US economy contracted “abruptly and suddenly” because of the coronavirus

The US economic activity has seen a sharp decline due to measures to curb the spread of the coronavirus, according to the Federal Reserve’s Beige Book.

“Economic activity contracted sharply and suddenly in all regions of the US as a result of the COVID-19 pandemic”, said the Fed.

According to the Central Bank’s report, all areas report highly uncertain business prospects, with conditions expected to worsen in most places over the next few months. The analysis is based on information gathered from the Fed’s 12 regional branches through April 6th.

Businesses across the country stopped work in March because of measures taken to curb coronavirus. According to the Fed, about a quarter of businesses in the Philadelphia region don’t work.

“No sector is spared”, said the Fed’s Philadelphia branch.

The worst-hit industries are those related to leisure and lodging, as well as retailing beyond the purchase of essentials, according to Fed Boston. And while food and medical manufacturers say there is strong demand, they say they have difficulties in manufacturing and supply chains.

All regions are seeing job cuts after drastic isolation measures have led to the loss of millions of jobs and projections that the US economy will shrink by 25% annually in the second quarter. However, none of the areas reported increased wage pressure. Even grocery store employees have a pay raise because of the risk that employees take.

In response to the economic downturn, the Fed has unleashed an unprecedented set of tools designed to support households and businesses and provide more liquidity. The central bank cut interest rates to near-zero last month, drastically increased asset purchases and announced emergency lending programs worth 2.3 trillion USD. The next Fed meeting will be held on April 28-29.