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Fed report notes sharp virus-related drop in economy

This May 22, 2020. photo shows the Federal Reserve building in Washington. (Patrick Semansky / AP)
This May 22, 2020. photo shows the Federal Reserve building in Washington. (Patrick Semansky / AP)
By Martin Crutsinger Associated Press

WASHINGTON – The Federal Reserve detailed Wednesday what most of the nation is already acutely aware of: Economic activity fell sharply around the country in April and May as measures to combat the spread of the coronavirus outbreak took hold.

Drawing on reports from its 12 regions, the Fed noted that consumer spending dropped sharply as mandated closure of many retail establishments remained in place. Auto sales were also down sharply from a year ago.

The Fed’s report also pointed to sharp declines in U.S. manufacturing, with output notably weak in autos, aerospace and energy-related manufacturing.

Employment has fallen significantly, with millions of laid-off workers filling for jobless benefits. The Fed said that layoffs would have been even more severe, but the Small Business Administration’s Paycheck Protection Program helped many businesses to limit or avoid layoffs.

The Fed’s report, known as the beige book, will be used as a basis for discussion on the economy when the central bank’s policy-making committee meets on June 9-10 to decide its next moves on interest rates.

Since the global pandemic began, the central bank has cut its benchmark interest rate to a record low near zero and pumped billions of dollars into the financial system to ensure an uninterrupted flow of credit.

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