Sat. May 28th, 2022


The Omicron variant causes far less damage to the European economy than previous waves of Covid-19, shows an FT analysis of high-frequency data, largely due to high vaccination rates and society’s improved ability to live with the virus.

Although infection rates across the eurozone have risen to their highest levels since the start of the pandemic, cinema ticket sales, hotel bookings, mail placements and mobility data have fallen much less than in previous increases caused by the coronavirus.

Line graph of '000, rolling 7-day average shows The eurozone experiences an unprecedented boom in Covid-19 cases

This time last year, visits to shops, bars and restaurants fell more than 40 percent below pre-pandemic levels. This year, by contrast, visits dropped by less than half that amount, according to Google’s mobility data.

“The economic impact of the pandemic is fading through the wave,” said Bert Colijn, an economist at ING. “The relatively high levels of mobility are positive for economic activity.”

Line graph of% change compared to average of 3 January and 6 February, continuous 7-day average showing Visits to shops and restaurants decreased much less than in previous waves

This is reflected in economists’ growth forecasts. Silvia Ardagna, an economist at Barclays, predicts that the block’s economy will continue to expand by around 0.2 percent during the last quarter of 2021 and again in the first quarter of this year, despite Omicron. She also expects “solid growth in 2022-2023 driven by domestic demand”.

There is also little sign that Omicron has significantly harmed the job market, according to data from Indeed, a job search website. Unemployment in the eurozone had already fallen below its pre-pandemic, the 2019 average, in November.

Unemployment “will fall to levels we have not seen before” in the eurozone, says Claus Vistesen, an economist at Pantheon Macroeconomics, who expects tight labor markets combined with economic recovery to boost inflation, which has hit. a record high for the 5 percent block in December.

Line chart of% change in job postings since 1 Feb 2020, seasonally adjusted showing number of vacancies in the eurozone continues to increase

Nevertheless, the exponential rise in infection rates has hampered economic activity, as restrictions have forced people to isolate themselves and restrict public gatherings. This particularly affected consumer services.

In the first weekend of January, European film revenues in the EU’s four largest economies were about 20 percent lower than the same period in 2020, according to Mojo-data, a US website that monitors global box office sales. German restaurant bookings were also 30 percent lower in mid-January than at the same time in 2019.

Similarly, tourism and international travel remain weak. Flight numbers are 35 percent lower compared to 2019’s pre-pandemic rates. Hotel bookings have also fallen back to levels last seen in the spring of 2021, according to Sojert Data, a digital marketing platform.

This is nevertheless a noticeable improvement at this time last year, when discussions declined by much more.

Line chart of rolling 7-day average,% change compared to the same week in 2019 showing that flight numbers have dropped

Analysts say one difference with this wave is that restrictions – such as the Covid-19 passes needed in countries such as France and Italy to gain access to hospitality and leisure venues – largely target the unvaccinated and those who have not yet fallen ill. not. Since they form a minority, the rest of the economy can remain open.

“Covid cases have increased across Europe, restrictions have been applied and mobility has declined,” said George Buckley, an economist at Nomura. “After all, there are reasons to be optimistic,” he added, predicting a quick recovery in the spring.

Analysts said another reason for the smaller impact on economic activity this year was that hospitalization and mortality rates rose far less than infections. In 2021, much lower infection rates dragged the eurozone into a recession.

Jack Allen-Reynolds, an economist at Capital Economics, expects “the current wave of infections caused by Omicron will burn out faster than previous waves, allowing restrictions to be eased in February”.

Indeed, France said this week it will start easing Covid-19 restrictions from next month, as the wave of infections has peaked in the Paris area and is expected to do the same in the rest of the country soon.

Better times are also predicted for manufacturers. Daily German data on truck kilometers, a power of attorney for industrial production, rose above November levels, a sign that China’s zero-covid policy has not yet affected global manufacturing supply chains.

Even if there are supply disruptions, higher inventory levels mean that factories should be able to eliminate any shortages more easily than before, said Paul Donovan, chief economist at UBS Global Wealth Management.

“Overall, Omicron is likely to be much less disruptive than previous waves of the pandemic,” he said. “People have learned to adapt and it reduces a lot of the damage.”



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