The general business activity index in the Kansas City Fed’s Services Survey plummeted to -58 in April after -16 in March. The survey data only runs back through January 2014 so there is no recessionary period with which to make a comparison. The report said the decline “greatly surpasses” the previous record in March. However, the outlook for six months from now was not much changed to -28 in April after -30 in March. That it did not worsen suggested that businesses in the District are not expressing heightened worries about the outlook.
Respondents’ comments were focused on maintaining payrolls where at all possible and the use of PPP loans to tide over revenue shortfalls, which were considerable. The index for sales revenues fell to -81 in April after -17 in March.
The index for employment reflected the necessity to layoff workers with a decline to -42 after -15 in March. The wages index fell to -22 after 1 as businesses were forced to reduce compensation in the absence of work. The workweek index contracted further to -34 in April from -4 in March.
The index for input prices was down to -3 in April after 17 in March, in part on lower energy costs. The selling prices index showed that pricing power was absent at -34 after -4. Both were at series lows.
The Kansas City services index has only a so-so correlation (0.446) with the ISM Non-Manufacturing Index. But taken in context with the severe drops reported for services activity in the New York and Philadelphia Districts, it is a solid indication that the ISM measure is going to dip into contractionary territory in April for the first time in over 11 years.
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