MNI INTERVIEW: US Services Brace for Dragged Out Recovery: ISM

By Brooke Migdon

     WASHINGTON (MNI) - Still-waning consumer confidence will likely hinder a

speedy economic recovery even as a handful of statewide stay-at-home orders are

reversed and businesses begin to reopen their doors, the chair of the Institute

for Supply Management barometer told MNI on Tuesday.

     "It's going to be all about consumer confidence," Anthony Nieves said when

asked about a near-term recovery, adding that "there will be business

fatalities" because many smaller establishments were unprepared for what in some

cases has been a months-long stoppage of revenue.

     "When we come out of lockdown, I don't anticipate a V-shaped recovery," he

said.

     Consumer confidence plummeted in April, with the Conference Board's measure

falling nearly 40 points to 86.9 from 118.8 in March. That's a problem when

household spending accounts for 70% of the U.S. economy, Nieves said.

     The ISM services index contracted in April for the first time since

December 2009, falling 10.7 points to 41.8 from 52.5 in March. The

non-manufacturing business activity sub-index decreased to 26, the lowest on

record, and employment fell by 17 points to 30 from 47 in March.

     --LESS THAN FULL CAPACITY

     Nieves said phased re-openings, which would leave some social distancing

guidelines in place when businesses re-open, mean some establishments will have

to operate at a fraction of their full capacity and that could lead to prolonged

unemployment and more business closures. 

     "We'll see workers come back into the workforce, but it won't be at full

capacity," he said. "Even when restrictions are lifted, how many people are

really going to go back to visiting these establishments?"

     Businesses like restaurants, which in most states have been unable to offer

dine-in services for more than a month, would be lucky to get little more than

two-thirds of their customer base back once restrictions are lifted, Nieves

said. And consumers are likely to practice caution even as businesses reopen, as

new coronavirus infections surge in some areas of the U.S. and nationwide

unemployment remains high.

     Business owners will have to weigh the cost of remaining only partially

open with the cost of closing entirely.

     "There's going to be some that can't recover from this," he said, adding

that even with rent and payroll tax deferments and a cash infusion from the

government, "it's still tough for these operators to make a go of it."

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

[TOPICS: MAUDS$,M$U$$$,MT$$$$,MX$$$$]