Tenth District Services Activity Dropped Sharply
Business activity dropped sharply in April
Tenth District services activity dropped sharply in April, greatly surpassing the previous survey low set in March, and expectations for future activity remained negative (Chart 1 & Table 1). The input price index declined slightly and the selling price index fell further. Firms expected future input prices to hold steady, while selling prices were expected to decrease in six months.
The month-over-month services composite index was -58 in April, down sharply from the previous low of -16 set in March (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. All month-over-month indexes decreased in April. Except for the access to credit index, all month-over-month indexes were the lowest readings in survey history (since 2014). The decline in general revenue/sales index was broad across business sectors, but especially driven by steep losses in travel and tourism. All of the year-over-year services indexes fell sharply, and the year-over-year composite index dropped from -4 to -44. Expectations for future services activity remained negative with a future composite index of -28, up only slightly from -30 in March.
This month contacts were asked special questions about measures taken to cover shortfalls in revenues and changes in employment as a result of Coronavirus (COVID-19). Nearly 69 percent of firms reported applying for the SBA PPP program, around 56 percent reported having drawn down cash reserves, and 31 percent made increased use of a credit line or took out a new loan (Chart 2). Around 23 percent of contacts obtained a temporary reprieve on a loan or rent payments and 21 percent of businesses dipped into savings or personal funds. A number of firms reported applying for emergency governmental funding, but had not received funds yet. Regarding employment changes in response to coronavirus, 43 percent of firms used part-time or reduced staffing levels, 28 percent furloughed employees, 25 percent reported using PTO, and around 23 percent of firms had layoffs (Chart 3). Additionally, 41 percent of respondents reported taking other measures regarding employment in response to coronavirus, such as maintaining staff levels, cutting overtime, increasing work from home, alternating shifts, and implementing more hygiene and social distancing measures.
Selected Services comments
"Completely different when we cannot be open for foot traffic- must adapt to internet and phone sales with reduced shifts and figure out how to use social distancing in a one-on-one sales environment."
"If sales volume doesn't improve soon, we will be forced to lay-off many more employees."
"We expect business to drop another 10 to 15% in the next two weeks… probably furlough more people this week."
"The PPP plan allows us to keep everyone employed at the same rate of pay."
"Have secured PPP loan, but because we cannot be open for business, wages will be dramatically down for 8 week period. The result will be maybe 25% of loan will be forgiven and thus limited benefit of PPP."
"We have been told our PPP application was accepted, but it has not yet been funded."
"With the PPP assistance, we expect to be able to carry through with limited personnel changes."
"We chose to retain all employees, those that are able are working from home… some are not working due to lack of work, however, they are being paid."
"Work with half the staff at home one day and then at the office the next."
"Having personnel work in shifts at smaller branches and keeping social distancing in mind."
"Not much visibility at present without knowing how and when the economy restarts."
"We have been a benefactor of the pandemic… with increased sales while the population is homebound. Thus have needed more personnel during this time."
"Customers are hesitant to make large purchases and services to commercial customers have been put on hold. Demand for other services has been the strongest in years."