Your Economy and COVID-19

BY Brian Loftus
3/13/2020 - HVAC Market Intelligence , COVID-19

Typically, we would expect the Fed to consider increasing interest rates after such an encouraging jobs report, instead the Fed cut rates March 3 and issued the following explanation: “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent.”

The following day the Fed released its latest Beige Book report. This features commentary by each of the 12 Federal Reserve Districts about activity in their regions. We study each edition for qualitative insights into the trends or economic health across the country to support our quarterly HARDInomics. Could COVID-19 influence the pace of this expansion? This report mentions “labor” 51 times, “employment” 55 times, and COVID-19 or Coronavirus 57 times. Most of the references relate to identified or anticipated supply chain disruptions. This global public health emergency was not yet on the radar screen for the previous edition.

Dr. Yossi Sheffi of MIT is well regarded on the topic of supply chain risk after writing five books related to the topic such as The Resilient Enterprise. His article in the Wall Street Journal late last month encourages companies to take precautionary measures to minimize exposure to likely supply disruptions. The article summarizes five steps including reviewing the needs of critical customers and the abilities of key suppliers. The guidance can be summarized as “plan for worst and hope for best.” The more “optimized” these supply chains are the more fragile they become. We are already seeing signs of supply disruption. Cooling season will be here soon whether COVID-19 still is or not, and inventory shortages are likely. 

Last month in HARDInomics we indicated the 1.9% consensus GDP growth forecasts for this year and next will be under pressure during the months ahead. That will result from the recent volatility in the financial markets that will have a negative impact on leading indicators and Consumer Confidence. Eurozone economies were already at stall speed and will likely be tipped into recession by this disruption. We have begun tracking NFIB small business indicators for HARDInomics and are interested to see the evolution of hiring attitudes and confidence while battling supply chain uncertainty.

This map by HealthMap could be a useful resource for all of us to understand and interpret the flow of news on this developing challenge.

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If you have any questions, or would like to suggest a featured topic for next month's DDN, contact Brian Loftus at