Post-Pandemic Economic Outlook - Feb 10
Posted: Wed Feb 10, 2021 2:11 pm
The following is from BofA Global Research Team
Green shoots are starting to spread
10 February 2021
Economics: The Covid-19 situation has improved drastically over the past four weeks. The 7-day average of daily cases has fallen nearly 56% from the Jan 11 peak to 107.3k as of yesterday, and the number of people hospitalized has dropped to 84.2k, down 36% from its peak. Additionally, vaccines are being administered at a rate of nearly 1.5mn per day, well above the 1mn daily goal set by the Biden administration. It’s not all rosy though as the risks from virus variants remains a concern, and part of the drop in cases is due to a decline in testing and, more recently, snowstorms in the NE.
Meanwhile, we are seeing more broad-based improvement in the high frequency economic indicators. To name a few: (1) mobility measures continue to reverse the holiday related plunge, and visits to retail and recreation locations are edging higher; (2) Air passenger travel increased by 12% from a week ago; (3) initial jobless claims fell below 800k for the first time since the holiday distorted weeks. Weekly activity measures are still moving sideways, but we would be surprised if they don’t turn upward soon, particularly as restrictions on activity are reduced.
We can see how mitigation measures affected activity by focusing on the restaurant industry over the last three months. To proxy restrictions, we use industry level data from Homebase on the share of restaurants open. We then compare the change in the share of restaurants open to the change in seated diners. Unsurprisingly, restrictions on indoor dining were a key factor behind the drop in seated diners in Nov and Dec. Then in January there was a pickup in dining out as states began to ease restrictions. We similarly saw an increase in Opentable restaurant reservations of late, particularly in the West and Midwest. We think poor weather conditions likely restrained activity in the Northeast.
Bottom line: The drop in virus cases is decidedly good news and is leading to stronger economic activity. But we must remain on watch given the risk from new variants.
--------------------------------
MY TAKE: If the number of people hospitalized for Covid-19 continues to decline and the number of vaccinated people continues to increase, even Dr. Fauci will eventually call an end to this pandemic. Pandemics all must end eventually and FEAR mongering must stop. Regardless, there is going to be a surge in oil demand in Q2. OPEC+Russia will be in control of the world's oil price and we may need every drop of the spare capacity later this year. The U.S. won't get back to pre-pandemic oil production for at least two year no matter how high oil prices go and I now think $100/bbl has a chance of becoming the "new normal".
Green shoots are starting to spread
10 February 2021
Economics: The Covid-19 situation has improved drastically over the past four weeks. The 7-day average of daily cases has fallen nearly 56% from the Jan 11 peak to 107.3k as of yesterday, and the number of people hospitalized has dropped to 84.2k, down 36% from its peak. Additionally, vaccines are being administered at a rate of nearly 1.5mn per day, well above the 1mn daily goal set by the Biden administration. It’s not all rosy though as the risks from virus variants remains a concern, and part of the drop in cases is due to a decline in testing and, more recently, snowstorms in the NE.
Meanwhile, we are seeing more broad-based improvement in the high frequency economic indicators. To name a few: (1) mobility measures continue to reverse the holiday related plunge, and visits to retail and recreation locations are edging higher; (2) Air passenger travel increased by 12% from a week ago; (3) initial jobless claims fell below 800k for the first time since the holiday distorted weeks. Weekly activity measures are still moving sideways, but we would be surprised if they don’t turn upward soon, particularly as restrictions on activity are reduced.
We can see how mitigation measures affected activity by focusing on the restaurant industry over the last three months. To proxy restrictions, we use industry level data from Homebase on the share of restaurants open. We then compare the change in the share of restaurants open to the change in seated diners. Unsurprisingly, restrictions on indoor dining were a key factor behind the drop in seated diners in Nov and Dec. Then in January there was a pickup in dining out as states began to ease restrictions. We similarly saw an increase in Opentable restaurant reservations of late, particularly in the West and Midwest. We think poor weather conditions likely restrained activity in the Northeast.
Bottom line: The drop in virus cases is decidedly good news and is leading to stronger economic activity. But we must remain on watch given the risk from new variants.
--------------------------------
MY TAKE: If the number of people hospitalized for Covid-19 continues to decline and the number of vaccinated people continues to increase, even Dr. Fauci will eventually call an end to this pandemic. Pandemics all must end eventually and FEAR mongering must stop. Regardless, there is going to be a surge in oil demand in Q2. OPEC+Russia will be in control of the world's oil price and we may need every drop of the spare capacity later this year. The U.S. won't get back to pre-pandemic oil production for at least two year no matter how high oil prices go and I now think $100/bbl has a chance of becoming the "new normal".