While the effect of the COVID-19 virus on financial markets has been apparent for weeks—US equities fell 30% from February 21 to March 20—we are still months away from realizing the full economic effect. However, the recent Survey of Business Uncertainty (SBU) portends a sharp drop in business activity in 2020. Moreover, business pessimism grew from March 9 to March 20, while the survey was in the field.
When asked directly about the impact of coronavirus developments in mid March, firms see a 6.5 percent negative hit to their sales revenues in 2020. Comparing what firms say about their overall sales outlook in March to what they said in February yields a very similar drop in expected sales revenue. Further, firms’ uncertainty about their own sales growth over the next year rose 44 percent from February to March.