In the last 12 months, a total of 7.4 billion doses of the multiple vaccines available against Covid-19 have been administered worldwide. According to Bank of America calculations, when Americans celebrate the next jYou are the Thanksgiving holiday, the number of inoculated doses will exceed the total world population, which the entity estimates at 7,800 million people. Yet as economies shake off the $ 32 trillion in fiscal and monetary stimulus applied since the pandemic hit, mounting price pressure and a new wave of contagion stand in the way of the ongoing recovery.
Proof of this can already be seen in the countries of emerging Europe, where new infections already exceed previous peaks and some of the main economies of the Old Continent, see Germany, Austria (which on Friday imposed confinements to its entire population) or the Netherlands, where the rebound in infections (already baptized as the sixth wave) threatens to harm consumer activity in the euro zone. In the UK, the number of cases remains high.
USA and Asia, under control
However, figures in the United States appear to be stabilizing and late-summer outbreaks in parts of Asia have been brought under control relatively quickly thanks to tight containment measures. In fact, China is vaccinating at a very fast rate and has one of the highest vaccination rates in the world. Still, most emerging countries still lag far behind advanced economies, despite their continued progress. This means that there is an increased risk of infections and serious illnesses returning.
“Daily deaths remain low in most regions. The exceptions are the emerging countries of Europe and, to a lesser extent, the US, where vaccination rates are lower than in most advanced economies due to doubts about vaccines, “says Jennifer McKeown, an economist at Capital Economics. On this side of the Atlantic, the average number of infections in the last 7 days reached 85,944 cases, almost half of those registered at the end of the summer. At this time, 79.8% of the population over twelve years of age has received at least one dose of the vaccine.
While it is true that the world’s largest economy has shown certain symptoms of fatigue, as the effects of a fiscal stimulus worth $ 6.99 trillion and a monetary stimulus, for an approximate amount of $ 4.69 trillion, dissipate. of dollars (an equivalent of 53.8% of GDP), the consumer remains unbeatable. In a clearly inflationary environment, where prices register their largest increase in more than 30 years, Americans continue to gain muscle as demonstrated by the October retail sales, which rose by 1.7% with respect to the previous month. American households have accumulated $ 2.2 trillion of excess savings during the pandemic. Although savings levels begin to normalize and have been concentrated mainly in those with higher incomes, who have a lower propensity to spend, a partial release of these savings will continue to shield consumer spending.
Consumption in the US is better positioned than in Europe for Christmas shopping
From BCA Research they calculate that households will disburse around half of the excess wealth, which would be equivalent to 5% of GDP. They also point out how, additionally, the revaluation of housing prices and financial assets has caused an increase in net worth. “Our global investment strategists estimate that the wealth effect will drive the consumption between 600,000 and 900,000 millions of dollars. Together, excess saving and the wealth effect could translate into 7 to 9% of GDP in additional annual consumption “, indicates Roukaya Ibrahim, strategist at this Canadian analysis house.
US GDP expanded at a rate of 6.3% and 6.7% year-on-year in the first and second quarters of the year respectively. Between the months of July to September, the activity suffered a deceleration, with an advance of only 2%. For Jay Hatzius, chief economist at Goldman Sachs, the US economy is in the process of reactivating to a growth rate of over 4% in the coming quarters, as the service sector continues to reopen, consumers spend part of their savings and inventory replenishment is in place. “These forces will face an important and constant headwind derived from the decrease in tax aid which, according to our forecasts, will end up leaving GDP growth close to its potential by the end of 2022, “he warns. Nor should we forget that given inflationary pressures, this bank estimates that the first rate hike will arrive in July next year.
Excess saving will cushion the spike in infections and price pressures
For now, looking into the Christmas shopping season, the outlook is more than rosy. “We look forward to a record time this year and next Thanksgiving weekend will play an important role, as always,” said National Retail Federation (NRF) President Matthew Shay. Yes indeed, although 66% of Americans plan to exercise their portfolios As of next Thursday, these levels remain below pre-pandemic levels (158.3 million people vs 165.3 million).
The NRF projects that Christmas sales during November and December will grow between 8.5% and 10.5% compared to 2020, reaching between 843,400 and 859,000 million dollars, which represents a record both in the growth rate and in the total amount spent. US consumers are expected to shell out an average of $ 997.73 per head.
Meanwhile, Covid-19 infections are on the rise in Europe and the worst-affected countries have begun to impose restrictions on both business activity and circulation. In Austria, where the number of cases has passed 220 per million a month ago to almost 1,300, a new confinement has been imposed. In Germany, several regions (including the capital Berlin) apply regulations that limit access to restaurants, cinemas and other venues only to those who have been vaccinated or recently recovered from the virus. On Tuesday, the Irish government reintroduced restrictions on the opening hours of licensed premises and urged people to work from home after an escalation in cases from 340 per million to 846 in the last month. Last Friday, the Netherlands reestablished a partial shutdown amid a nearly fivefold increase in cases over the past 30 days.
Fiscal and monetary stimuli in the US amount to 53.8% of GDP
As of today, the main investment desks expect that the repercussions on the recovery of the new measures will be quite small in general. It is true that the Austrian lockdown suggests that the economic damage could be greater. But the lower vaccination rates in those regions relative to the euro zone average ensure that measures will be less severe elsewhere. Furthermore, experience suggests that activity is more resistant to restrictions than last year. Morgan Stanley estimates that the eurozone will return to pre-pandemic GDP levels (Q4 2019) by the end of this year. Of course, its economist, Jacob Nell, states that the current quarter and the first three months of 2022 “will be more difficult” given that the economic situation faces multiple headwinds, such as the shortage of supply that weighs on industrial activity, the increase in inflation and the seasonal Covid. “Private consumption has been the main growth engine in the euro area – as elsewhere – and is expected to decelerate sharply in the fourth quarter and into early 2022, as the behavior of the euro area returns to normal. consumers, “he explains. The bank expects a rebound in the spring supported by a strong labor market and a supportive policy.
While the European consumer may falter, in China, despite the ongoing slowdown, consumption was postulated in October as an important pillar of the economy. Retail sales grew 4.9% (year-on-year) coinciding with the last great holiday of the year, National Day, which lasted a week and in which Chinese consumers took the opportunity to go shopping due to the strict restrictions still in place in the second largest economy in the world, where it is not allowed to fly abroad. The better-than-expected numbers come as some relief after the economy’s momentum has weakened in recent months due to power shortages, the housing market debacle and multiple Covid-19 outbreaks. However, the recovery remains uncertain, given the enormous contribution of the real estate sector – 25% of GDP if related industries are included – and the disruption in travel and spending due to the zero contagion policy that the Xi government seeks. Jinping.
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