JPMorgan’s Caution
“The delta variant may impart a little more caution in consumer behavior,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., wrote in a note Thursday.
JPMorgan trimmed its estimate for consumer spending growth to 4.5% for the third quarter from 5% previously. Still, with inventory gains offering upside risks, Feroli left this quarter’s gross domestic product forecast unchanged at 8.3%.
Local Caseload
“I do not think the impact will be marginal,” said William Spriggs, chief economist at the AFL-CIO, in an email. Policy makers are underestimating how many people will remain home from work amid rising infections, and that it will hit prime-age workers hardest this time, he said.
“Even though the most-affected states are extremely unlikely to shut down, people stopped economic activity because of local caseload—not because of public orders. So, we could see retail sales continue to remain flat, as they have since March.”
Watch Schools
“The variant will do meaningful economic damage if it causes people to resume sheltering-in-place and forces schools to remain online when the school year starts in a few weeks,” Mark Zandi, chief economist at Moody’s Analytics, said in an email.
“Odds are uncomfortably high there will be other variants that are highly contagious, virulent, and elude our vaccines,” he said. But, “putting aside these dark scenarios, it remains highly unlikely the Delta variant would short-circuit the economic recovery.”
Vaccination Shield
“At least in the U.S., I just do not see the appetite for taking steps that would discernibly slow the economy—even mask mandates look like they will only be re-applied in a few places,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, in an email.
Stanley pointed out in a research note to clients that even though cases have risen at a faster-than-expected pace, nearly half of Americans are now fully vaccinated and more are seeking to be inoculated each day as public health efforts ramp up. That limits the risk of the new Covid-19 variant and helps assuage consumers, he said.
British Example
In the U.K., where the delta variant spread rapidly before it became prevalent in the U.S., “hospitalizations and deaths remain so far below where they were the last time cases were this high,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research.
“I don’t see much downside to the economy. Consumers remain flush with cash and spending continues apace. Inventories remain low and are likely to rebuilt in the months ahead, supporting manufacturing production. Homebuilders are working through backlogs, particularly now as construction costs have moderated, supporting residential investment. Capital spending intentions remain strong.”
This article was provided by Bloomberg News.