Fed Survey Shows Tepid Recovery in Early July, Outlook Uncertain

Optimism about a nascent recovery in the U.S. economy was dampened by increased uncertainty over the path of the coronavirus, according to a new report from the Federal Reserve.

“Economic activity increased in almost all Districts, but remained well below where it was prior to the COVID-19 pandemic,” the central bank said in its Beige Book survey released Wednesday in Washington. “Outlooks remained highly uncertain, as contacts grappled with how long the COVID-19 pandemic would continue and the magnitude of its economic implications.”

The report, prepared by the Chicago Fed, was based on anecdotal information collected by the 12 regional reserve banks on or before July 6.

Although economic activity may have picked up at the end of May and beginning of June as businesses reopened, a resurgence in coronavirus cases in many states is driving fears of a new slowdown. California has again imposed lockdown measures, and Texas and Florida have curbed certain activity. Businesses in the Fed’s survey reported uncertainty about future demand amid the resurgence.

Fed Governor Lael Brainard pointed to a highly uncertain economic outlook in a speech Tuesday, saying the central bank should turn its focus to providing accommodative monetary policy to support a full recovery. Officials held interest rates near zero at their meeting last month and signaled in their quarterly forecast that they expect to keep them there through 2022. Policy makers next meet July 28-29.

Resurgent Infections

“A late June resurgence in COVID-19 cases slowed or reversed the reopening process, jeopardizing further recovery in consumer spending,” the San Francisco Fed noted.

The words “uncertain” or “uncertainty” appeared 16 times in the report.