(Reuters) – U.S. economic activity has slowed in recent weeks as coronavirus infections have risen, and the country’s reopening phase may take longer than many initially anticipated, Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday.
Some states have hit pause on their plans to reopen businesses and imposed new restrictions after seeing infections rise, Mester said, a trend that is causing consumers to cut back on spending.
“The reopening phase has proved to be challenging,” Mester said in remarks prepared for a virtual event on Wednesday. “Thus, the reopening phase may be more protracted than many had anticipated when it started.”
A review of high-frequency data and discussions with regional contacts show that U.S. economic activity is slowing, Mester said. For example, she said, spending on services, including money spent on travel and dining, remains well below pre-pandemic levels despite increasing in May and June.
Mester said she expects the unemployment rate to remain elevated at around 9% at the end of 2020. She projects that economic output will decline by 6% compared with the end of 2019.
“The uncertainty around this forecast is extremely high. We are in an unprecedented situation and outcomes depend not only on appropriate economic policy but also on public health considerations,” she said.
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