Fed’s Beige Book Finds Coronavirus and Election Fears Spreading Through Economy

Federal Reserve
BRENDAN SMIALOWSKI/AFP/Getty Images

American businesses are growing increasingly worried about the spread of the coronavirus and the possibility that President Donald Trump could lose his bid for re-election in November.

The Federal Reserve’s latest nationwide survey of business conditions has found that the coronavirus outbreak has begun to impact travel and tourism businesses and disrupt manufacturing chains in parts of the United States. Other businesses report that although they have not yet been directly affected by the coronavirus, they are worried about the impact.

“There were indications that the coronavirus was negatively impacting travel and tourism in the U.S.,” the report said. “Manufacturing activity expanded in most parts of the country; however, some supply chain delays were reported as a result of the coronavirus and several Districts said that producers feared further disruptions in the coming weeks.”

The survey compiled by the Fed’s 12 regional banks and released Wednesday found that growth through late February continued at a moderate rate. It was completed by February 24, however, which means that it would not have captured the recent financial market turmoil and intensification of coronavirus fears.

The Fed’s San Francisco regional bank reported that the COVID-19 outbreak has led to decreased demand for aircraft from China and other Southeast Asian nations. Some American solar equipment manufacturers have also experienced delayed shipments due to supply-chain disruptions.

The survey, known as the beige book, will be part of the discussion when Fed officials meet later this month to review interest rates.

The Fed on Tuesday announced a surprise half-point cut in its benchmark rate in an effort to support the economy in the face of the spreading virus. The move, which pushed the Fed’s policy rate down to a range of 1% to 1.25%, marked the largest cut since the 2008 financial crisis.

Some analysts believe the Fed will cut rates even further at this month’s meeting, especially if the effects of the coronavirus have grown more serious by that time.

Federal Reserve Chairman Jerome Powell said at a news conference Tuesday that the Fed is “hearing concerns from people, for example in the travel business, the hotel business and things like that.”

Fed officials expect the impact to grow “and that’s one of the reasons we have come to the view that it would be appropriate for us today to move to support the economy and that’s what we have done,” Powell said.

–The Associated Press contributed to this report.

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