Will the Delta variant scare American diners and shoppers into staying home?

Fear of the variant may make consumers voluntarily stay home or avoid dining out and the movies

Oliver O'Connell
New York
Monday 26 July 2021 19:49
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Related video: Fauci warns Delta variant will produce ‘two Americas’ for vaccinated and unvaccinated

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Research by Bank of America suggests that the spread of the Delta variant of Covid-19 may have a negative impact on the US economic recovery from the pandemic.

The mounting case count from the variant has already worried investors.

In mid-July, the stock market suffered significant losses as fears that the reopening boom – largely led by pent-up consumer spending – may be curtailed by a resurgence of the virus.

Bank of America economists Stephen Juneau and Anna Zhou said in a research note on Friday that the Delta variant is likely to impact consumer behaviour going forward, Insider reports.

Citing a 351 per cent surge in the moving average of daily cases since 21 July, in tandem with a drop in uptake of the vaccines available to the American public, they propose that this could lead to a “sharp pullback in services spending”.

According to the research, the most vulnerable part of the economy is the leisure and hospitality sector, which accounts for 40 per cent of the 850,000 jobs added in June. Less consumer spending could see employment growth halted or reversed.

As lockdowns similar to those seen in previous surges of cases now seem unlikely to be implemented by federal, state, or local authorities, the response to an increasing number of infections will likely be an emphasis on vaccinations – also with the possible reintroduction of mask mandates.

This means that any direct impact on the economy will be driven by consumer choice, not direct government action – whether people will continue to go out to eat, go to the movies, or go on vacation, for example, as opposed to enforced closures of businesses.

“Shifts in consumer behaviour will determine how Delta affects economic activity and experiences during prior waves may not offer the best guide,” wrote Mr Juneau and Ms Zhou.

Using Michigan as a case study, when a surge in infections hit the state in late February, no restrictions were implemented by the state.

Nevertheless, consumer spending decreased, with service industries hit hardest as people voluntarily stayed home. This then had a direct impact on employment.

The two economists noted that to date there has been little evidence of the Delta variant significantly impacting the economy, but a hesitancy about being in certain physical locations – such as a crowded bar or restaurant – may creep into consumer habits.

Further to worried consumers staying home and possibly curtailing their spending, the economists also noted that during the previous surges in coronavirus cases Americans received stimulus checks to help offset damage to the economy – at this stage, further checks are not being discussed.

According to the Centers for Disease Control and Prevention, 83 per cent of sequenced cases of Covid-19 in the US are now the Delta variant.

Currently, the seven-day average for new cases stands at 40,246, up 46.7 per cent on the previous week. While alarming, these figures are however 84 per cent lower than the all-time peak for Covid cases on 10 January, thanks to the availability of vaccines.

However, the seven-day average positivity rate has also shot up to 5.8 per cent, suggesting burgeoning community spread.

Hospitalisations are also increasing with new admissions up 32.2 per cent, and deaths are up 9.3 per cent – 99.5 per cent of deaths are among the unvaccinated.

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