Fed services survey sounds familiar

The latest summary of the service economy in the wider hereabouts sums up my own personal experience and outlook:

“Activity increased considerably in July, but remained lower than a year ago while expectations for future activity declined slightly.”

I am totally in tune with the tenor of these times. Thank you, coronavirus. That assessment is from the Kansas City Federal Reserve Bank's July Services Survey for the Fed's Tenth District, which includes Oklahoma, Kansas, western Missouri, Nebraska, Wyoming, Colorado & northern New Mexico.

“In July, services activity rose solidly compared to previous months, but remained below year-ago levels. Meanwhile, over a third of businesses reported higher business costs over the past 6 months, and expectations for future activity fell slightly,” said Chad Wilkerson, vice president and economist for the Kansas City Fed.

That's me. I got out more in July, but nothing close to July a year ago, and with cases of COVID-19 spiking, I remain unenthused about going places or doing much with groups of people. I've filled my tank just twice since March.

“What are ya? Afraid?” you might ask.

Yes, for my elderly friends, who I love, and others who are especially susceptible.

So I stay home when I can, which is a lot.

When I'm out, I wear a mask, and I hope you do, too — for others' sake. I even trimmed my long beard so a mask would fit better.

The Fed survey yields data — and on-theground commentary — on real estate, retail and wholesale trade, automobile dealers, transportation, information, high-tech and professional services, education, restaurants, health services, tourism and other service firms. It looks at indicators such as sales, revenue, employment and capital spending, and notes changes in prices of inputs and selling prices.

General data

Firms expected inputs to cost more and selling prices to rise over the next six months.

The month-over-month services composite index — a weighted average of the revenue/ sales, employment and inventory indexes — was 20 in July, way up from 3 in June and way, way up from minus 21 in May.

“Month-over-month indexes were largely higher in July. General revenue and sales jumped, and the indexes for employment, employee hours, and wages and benefits indexes expanded further. The part-time employment and capital expenditures indexes rose into positive territory in July after declining in previous months. However, the monthover-month indexes for inventory and access to credit continued to decline,” the Fed reported.

Real estate, retail, travel and tourism, transportation and health services drove the increase in the month-over-month general revenue/sales index, but restaurant activity fell.

Most year-over-year indexes remained negative in July, though the year-over-year composite index did rise from minus 32 to minus 20.

Costs and infrastructure

Researchers asked contacts about changes in business costs and the need for physical infrastructure changes in dealing with the effects of COVID-19.

First, 65% said their need for physical infrastructure had not changed in the past six months, and 30% said it had decreased. Looking ahead, 65% anticipated no physical changes over the next one or two years.

Also, 67% said they had utilized a workfrom-home policy in the past six months, but only a small share reported that some of their workforce will now permanently work from home.

Also, 39% reported no change in the cost of doing business in the past six months, 36% reported increases and 25% reported decreases.

Select commentary

• “For us, the PPP (federal Paycheck Protection Program) was a great program and a lifesaver. We downsized some but without the PPP we would have cut a lot deeper.”

• “We have reduced staff and with the reduced revenues, PPP is what is keeping our nose above the water.”

• “Safety for my employees is my #1 priority. I will absorb short term losses to make sure I am staffed when business does return — though we are a year or so away from our new normal. PPP dollars were a blessing, not only for the short term, but long term.”

• “As a small business we are only still open thanks to the PPP loan; the additional unemployment benefits have decreased willingness to work and/or to work for the wages we pay.”

• “The additional unemployment benefits have been problematic. We've had a number of applicants fill out applications and not show up for their interviews.”

• “Need oil demand to pick up.”

• “It is rough. Sales are down, costs are steady and we received no assistance of any kind.”

• “Most cost (increases) are tied to employees and we have slightly increased headcount over last 6 months. Other expenses tied to travel and marketing have decreased due to the pandemic.”

• “Wages and costs of supplies are up. PPE (personal protective equipment) costs are up as well as the usage.”

• “Costs decreased: there is no travel to meetings for employees.”

• “We are expecting the stimulus to either go away, expire or to be much more limited moving forward. We expect that this will soften business. If schools do not reopen fully, up to 20% of our workforce will be negatively affected as reduced hours of productivity occur each week.”

• “COVID risks are very real in that customers may or may not feel safe and thus it is very difficult to predict sales.”

That last thing, in addition to slowing the spread of the coronavirus, is the best reason for businesses to arrange for and strongly suggest social distancing, and provide or require masks for employees and clients and customers:

“Customers may or may not feel safe.”

The survey is available here: https://tinyurl.com/KCFed7-20ServicesSurvey.