What real-time indicators suggest about Omicron’s economic impact
WHAT IS THE the economic impact of Omicron? The latest variant of the coronavirus has unleashed at such a ferocious pace that forecasters are still catching their breath, and it will be some time before its economic effects become apparent in official data, which is released with a lag. But a number of faster, though partial, indicators can provide insight into how consumers and workers can tailor their behavior.
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Consider first the willingness of people to come out. A mobility index using real-time data from Google and built by The Economist includes tours of workplaces, retail and leisure sites, and transportation hubs. This measure has been reasonably stable in America, albeit at levels below pre-pandemic standards, and has declined slightly in Britain and Germany in recent days. But underlying these numbers are larger differences depending on the type of activity. The return to the office seems to have stalled. In America and Germany, trips to workplaces fell about 25% and 16% below pre-pandemic levels, respectively, in the week to December 23. In Britain, where the government issued guidelines for working from home, they were 30% lower (see Figure 1). In contrast, retail and leisure activity continued to recover in all three countries. This suggests that people may have become more picky about when to leave home, especially at the start of the holiday season. It could also indicate that people who can easily work from home were doing so, a sign of the economy’s increased adaptability to new variations.
Other measurements show that the hospitality industry is taking a hit. Fewer people eat in restaurants than in 2019, according to data from OpenTable, a reservation platform. In America and Great Britain, there were 12 to 15% fewer diners in the week to December 20 than during the same period in 2019 (see graph 2).
Omicron also appears to have contributed to the travel disruption. This was most noticeable in America and China, where domestic air travel had more or less returned to normal. In the week to Dec. 26, some 3,500 domestic and international flights that started or ended in America were canceled, according to FlightAware, a data company, accounting for about 2.5% of the total number of flights. This compares to a 0.7% cancellation rate in the same week in 2019. US airlines blamed the cancellations on staff shortages linked to covid and bad weather. The number of passengers passing through US airports on December 22 and 23 slightly exceeded that of the same period in 2019. But only 3.2 million made trips on the 24 and 25, against more than 5 million in 2019.
These indicators only give a limited view of the economy. But they may well capture the areas most likely to be affected by new outbreaks of covid-19. Analysts at Moody’s, a rating agency, downgraded their growth estimates in America in early 2022 in part due to reduced travel spending. Economists at Pantheon Macroeconomics, a consultancy firm, expect the pain in Britain to be concentrated in the hospitality, entertainment and travel sectors, while other sectors remain unchanged. This indicates a lower overall economic impact this time around, compared to previous waves. But with infections still on the rise and governments considering further activity restrictions, Omicron’s full effect may still be ahead. As covid-19 enters its third year, every forecaster now knows how to prepare for the unexpected. ■
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This article appeared in the Finance and Economics section of the print edition under the title “Omicron Omen”