Fed officials suggest U.S. recovery may be stalling
- 09 July 2020
Federal Reserve officials raised fresh doubts on Wednesday about the durability of the U.S. recovery, while new business surveys highlighted developing risks from the relentless coronavirus pandemic, APA reports citing Reuters.
In separate appearances, Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin noted what Barkin characterized as “air pockets” facing the U.S. economy - businesses exhausting existing order books without refilling them, and households facing the end of unemployment benefits and other support.
“Businesses like construction had pretty good pipelines and kept going,” through the first phase of the pandemic Barkin said in webcast remarks to a group of local chambers of commerce in Virginia’s Shenandoah Valley.
He added, however, “New orders are not coming on line in the same way. We have fiscal payments ... that are coming to an end and it is not clear what is going to replace them.”
Bostic told the Rotary Club of Columbus, Georgia, he was concerned not so much that states in his southern region had tried to reopen too fast, but without due care about how to manage the riskiest activities.
Caseloads are now surging in places like Florida, and high frequency data on small businesses, for example, “are suggesting the energy for reopening businesses and for just general activity is starting to level off,” he said.
The comments from Barkin and Bostic suggest the seemingly rapid rebound in jobs, retail sales and some other measures of activity in May and June may not persist.
There were hints of the same in two business surveys released on Wednesday.
In the latest quarterly survey of more than 500 company chief financial officers, conducted jointly by the Atlanta and Richmond reserve banks and Duke University, the finance chiefs on average said they were worried about continued weak demand for their products, and expected job recovery to stall for the rest of the year.
Overall optimism among the CFOs did improve compared to the first weeks of the pandemic, though. That is in line with other surveys among households and businesses that suggest people feel the deepest economic risks from the pandemic have been avoided.
A quarterly sentiment index published by the Conference of State Bank Supervisors, by contrast, showed community bankers remained deeply pessimistic. The most recent reading was 90, roughly unchanged since the last survey and well below the “neutral” reading of 100. The figure was 122 last fall.