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An investigation by the U.S. Federal Reserve into U.S. business conditions found modest economic gains at the beginning of the year, although some parts of the country’s slowdown stemmed from a renewed increase in COVID-19 cases.
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The Fed report released on Wednesday said that the bulk of the Fed’s 12 regions have reported modest increases in economic activity over the past few weeks.
But three districts – New York, Philadelphia and Cleveland – said activity had weakened. Two districts – St. Louis and Kansas City – said activity had generally remained unchanged since the Fed’s last meeting in mid-December.
The Fed said reports of consumer spending, which drives 70% of economic activity, were mixed. Some districts have reported the decline in retail sales and the demand for hospitality and leisure services as local governments have introduced stricter measures to curb the increase in virus cases.
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“While the prospect of COVID-19 vaccines has boosted business optimism for growth in 2021, it has been tempered by concerns about the recent revival of viruses and the consequences for short-term business conditions,” the Fed said.
The Fed’s report, also known as the beige book, will form the basis for discussions when central bank officials hold their next meeting on interest rates on January 26-27.
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The Fed pushed interest rates to a record low of zero to 0.25% last March. The expectation is that rates will remain at ultra-low levels during this year and beyond.
The beige book said that the demand for workers is strongest in manufacturing, construction and transportation, but that employers in those industries report problems filling jobs.
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“These rental problems have been exacerbated by the recent revival in COVID-19 cases and the consequent disruption of the workplace in some districts,” the report said.
The leisure and hospitality sector has reported further layoffs due to stricter controls due to an increase in virus cases.