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These posts examine local, regional and national data that matter to the Fifth District economy and our communities.

April Update: The Coronavirus and Firms in the Fifth District

Regional Matters
May 1, 2020

On March 24, we reported the results from a set of additional survey questions specifically about the effects of COVID-19 on Fifth District business conditions. It was clear from the results of that survey that business conditions had deteriorated, particularly in the last week of the survey period, which roughly corresponded with many state-issued shutdown orders, when more than two-thirds of responding firms reported a negative effect. The conclusion of that post simply said “stay tuned…” This post is the continuation of that conversation.

Our April survey results were based on responses from 135 firms (80 service sector firms and 55 manufacturing firms). In addition to the standard monthly questions, the April survey included additional questions about the impacts of COVID-19 on business operations, firm responses, current concerns, and business sustainability. Those results are in the next section.

COVID-19’s Impact on Firms

According to our survey results, many Fifth District firms struggled as a result of the mandated shutdowns and social distancing orders due to the COVID-19 outbreak. In fact, more than two-thirds of survey respondents faced somewhat lower or much lower customer demand, sales, and profits. Only a handful of businesses reported any positive impact of the pandemic (primarily those engaged in supplying essential products and services such as food manufacturing, transportation, and financial services). Additionally, slightly more than half of firms reported reduced availability of raw materials and inputs, and about 60 percent were cutting capital spending.

These responses, too, worsened over time. For example, in the first period of the survey, less than half of responding firms said that customer demand was somewhat or much lower; in the second period, reports of lower demand increased to around 68 percent of manufacturers and 78 percent of service sector firms. In the third period, the share of manufacturers reporting lower demand rose to over 80 percent while the share of service sector firms remained about the same.

When asked to articulate their current and expected level of operations, about half of firms that responded had already partially shut down operations temporarily or thought they might do so in the near future. Only about 6 percent of respondents actually shut down all operations temporarily and very few firms reported plans to shut down permanently. In terms of employment, although many firms reported no change to hours or staffing, about 35 percent cut hours for existing staff and 28 percent reduced the number of employees. Most firms (more than three-quarters) that cut hours cut them by less than 30 percent. Similarly, around half of the firms that reduced payrolls did so by a relatively small amount.  

Responding firms were then asked about their financial concerns. Very few were concerned about maintaining solvency, accessing credit, or incurring debt. However, a sizeable portion of firms (about 40 percent) were very concerned about their ability to collect payments from customers and maintain adequate cash flow. When asked what financial measures they had taken, the most common responses were drawing down cash reserves, taking out new loans, or making use of lines of credit. Some firms said in an open-ended response that they had applied for funds through the Paycheck Protection Program—the survey opened just prior to the passing of the CARES Act.

Lastly, firms were asked how long their business could continue at current levels of operation. The chart below shows that very few survey respondents were in immediate danger of shutting down (i.e., could afford to operate at the current level for less than a month). Around 58 percent of respondents believed they could sustain current operational levels for one to six months, and almost a quarter said they could continue for longer than one year.

While we asked special questions about the coronavirus to gain additional insight into current events this month, we also have standard questions about business conditions that we ask every month. This allows us to compare conditions over time in a consistent manner. The section below looks at the results of these questions in the April survey.

What Can We Learn from this Month’s Standard Indexes?

The April survey results of our standard questions also reflected a struggling regional economy. In the service sector, indexes for demand, revenues, employment, and local business conditions all reached historic lows and saw their largest one-month drops on record.  Meanwhile, in manufacturing, our headline composite index reached an all-time low, as did two of its three components—shipments and new orders. These indexes, as well as the third component of the composite index—employment—all saw record one-month drops. The manufacturing index for local business conditions also hit its lowest value and had its largest drop on record.

Most of the questions in the monthly survey report ask participants about changes from the prior month. Those responses are translated into diffusion indexes, or the share of respondents who reported an increase minus the share who reported a decrease. We seasonally adjust to ensure that a month-to-month change in the index is not just the result of standard seasonal changes, such as increased retail around the holidays in December. While the indexes highlighted in our surveys each month are seasonally adjusted, for the remainder of this post, we will focus on non-seasonally adjusted indexes to allow for easier comparison across subgroups.

As with the March survey, the April survey responses were increasingly negative as the month progressed.

The charts below break up the April survey responses into three approximately equal periods: March 26–April 3, April 4–12, and April 13–22. The increasingly negative indices show that as the survey period progressed, a larger share of manufacturing firms indicated declines in shipments, new orders, and employment. Similarly, the share of service sector firms reporting declines in revenue, demand, and employment increased as the survey period went on.

Although conditions were generally deteriorating, there was variation across sectors. Arts and entertainment venues have been hit hard by social distancing measures, as have restaurants, and all survey respondents in these industries reported decreased revenues and sales in our April survey period. Responses from retail and wholesale firms were also more negative than those of service sector firms overall. However, real estate and construction firms were less likely to report a decrease in revenue than firms in the service sector as a whole.


The results of our April survey clearly indicate that the economic decline that began in March continued through April. Most Fifth District businesses reported declining demand, sales, employment, and hours, which they largely attributed to the coronavirus outbreak. Most firms surveyed expected to maintain solvency for many months. However, many firms also expressed concerns about the future, and respondents reported applying for loans or the Payment Protection Program to help them stay solvent. In general, economic conditions were bleak for Fifth District firms through the end of the survey period. Now we look to the May results to indicate how the economy will progress into its next phase.

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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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