Texas business activity falls off the coronavirus cliff

(Reuters) - Business conditions in Texas, the second-biggest U.S. state by economic output, deteriorated precipitously this month as the coronavirus pandemic slowed both supply and demand for a wide range of industries, surveys conducted by the Dallas Federal Reserve Bank show.

The Dallas Fed's general business activity index, which measures manufacturers' perceptions of broad economic conditions, fell to a record low, as did an index tracking their outlook for the sector. (For a graphic, please see https://fingfx.thomsonreuters.com/gfx/editorcharts/oakpezydvrd/index.html)

"If the self-imposed shutdown continues at this rate, it is my opinion the country will be entering a depression by fall," one machinery manufacturer responding to the survey told the Dallas Fed. "I am scared of losing my income, my shop and my home."

The bank's index of factory activity also fell sharply, to its second-lowest reading since the measure's first publication in 2004.

Service-sector companies are faring even worse than manufacturers, another Dallas Fed survey showed, with 69% of service firms reporting a drop in demand because of the virus, compared with 63% of manufacturing firms.

"I suspect an efficacious vaccine will have to be developed and proven before that negative is removed from the economy," a rental and leasing services executive told the bank.

Across all types of firms, about two-thirds see the virus' impact lasting six months or less, the surveys showed. Although 56% expected to need to trim their payrolls, 69% expected any layoffs to be temporary.

The surveys were conducted March 17-25 and the responses were published on Monday.

Texas has reported more than 2,500 cases of coronavirus and 34 deaths, fewer than other economic power-houses like New York and California. The governor has not imposed a state-wide stay-at-home order, though some local authorities have done so to stem the spread of the virus.

Texas produces about 10% of all American manufactured goods, second only to California.

Above all, the survey underscored how quickly the situation is changing.

"You should survey us again in one week - I would expect things to be different," one manufacturer said.