Investors looking for signs that the spread of the delta variant of the coronavirus is slowing economic activity, despite the lack of new widespread blockades, so far find little evidence in the high-frequency economic data types that erupted. in popularity during the early days of the pandemic.
A recent market narrative stated that, even without widespread blockages, the spread of the delta variant is likely to result in a slowdown in activities that can be measured by a series of publicly available data, including passenger billings from the airlines, restaurant reservations, hotel occupancy and others.
“We haven’t seen this same trend play out,” Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions, said in a telephone interview.
“What we’ve seen is that sentiment is having a hit in terms of delta fears, but it doesn’t really convey to mobility data,” he said.
Read: The Delta variant creates a number of reasons to question the U.S. recovery in the second half
Take, for example, OpenTable restaurant reservation app data on seated diners from reservations and accesses. As shown in the chart below, which tracks the 2020 and 2021 global settlements, respectively, compared to the 2019 settlements, activity has remained close to pre-pandemic levels in recent weeks.
In the United States, Florida and Texas (two states among those most affected by the spread of the delta variant), restaurant bookings fell sharply in early August, but stabilized last week, Aneta Markowska said. , chief financial economist at Jefferies, in Monday’s Note. And there has been no clear answer in retail foot traffic, which fell in Florida but rose in Texas and elsewhere, he noted.
Related: This may be the most watched indicator of the post-pandemic economy
Flight and traffic activities appear to have stopped, he said, along with hotel occupancy rates, but there was no evidence of damage to the labor market. Jefferies ’U.S. economic activity index rose modestly last week to 99.3, at the top of its recent range, Markowska said. The index has remained largely unchanged over the past five weeks, with gains in movement and employment offset by declining consumer activity.
The various data have shown some signs of “flattening,” Melson said, but some of those indications coincide with seasonal patterns that investors should be wary of when using so-called alternative data. Unlike official government versions that include seasonal and other adjustments, many of these series need to be cleaned up by investors and economists to give an accurate picture of the underlying trends.
File: The “alternative” data explosion allows regular investors to access tools that previously only used hedge funds
Melson said the largely resilient readings are a sign that the spread of the delta variant does not translate into the kind of economic success that some forecasters feared could occur as consumers take steps to protect themselves from COVID-19.
The number of U.S. hospitalizations of COVID-19 has continued to rise, with new data showing that 100,000 people were currently hospitalized, a figure that is well on track with levels observed during the winter.
Shares, commodities and other assets considered risky fell last week, in a move attributed to growing fears about the spread of the delta variant. Many of those assets bounced back this week, however, with analysts citing expectations that the peak of the delta gap could be near.
US stocks ended lower on Thursday, but have seen gains this week, with the S&P 500 SPX,
and Nasdaq Composite COMP,
closing records Wednesday.
Jeff Kleintop, chief investment strategist at Charles Schwab & Co., argued that the data has become less useful as a signal of economic activity. A year ago, changes in mobility and other measures were closely related to the economy.
In late summer this year, economic data has begun to disappoint, he said, but investors received few warnings of high-frequency indicators. Meanwhile, consumer confidence, as measured by the University of Michigan, was a big hit in August, falling to its lowest level since 2011. In July, U.S. retail sales fell well short of expectations. which indicated a slowdown in spending.
High-frequency data resistance is probably “a sign that people have physically adapted to the virus,” Kleintop said. “It seems to affect how they feel, but not in what they do.”
“There is a recognition that it is no longer so easy to gauge economic activity from where people are physically. It makes it a little more complicated,” he said.
Understanding these adaptations is important, economists said.
“The relationship between an important indicator such as mobility and economic activity in general is changing over time as humans learn and adapt,” said economist Jens Nordvig, founder of research firm Exante Date, in a live August 4 interview by Barron with MarketWatch.
Watch Barron live: Alternative data: what investors need to know
At the start of the pandemic, mobility data measuring items such as how often people visited grocery stores or other outlets were closely related to economic activity, Nordvig said. This relationship between mobility and economic activity has changed.
He said consumers moving away from stores find other ways to spend. Workers moving away from the office soon learned to be more productive.
“Mobility is still an important indicator, but the way it is mapped in economic activity is something non-linear that changes over time and therefore we must be very careful in assuming that these relationships are linear. “, he said.
Melson agreed that the relationship between data and activity has changed over time, but remained optimistic about the short-term economic outlook. It reduced the recent weakness in confidence data and retail sales.
Related: How investors use alternative data to track the inflation debate
The drop in consumer confidence reading may have reflected what has become an increasingly partisan divide between Republican and Democratic consumers, he said, while the timing of the “Prime Day” trade event of Amazon.com Inc. may have affected more and more retail sales numbers.
Delta fears are unlikely to lead to a significant decline in consumer activity in the current and fourth quarter, although supply chain disruptions could affect profit expectations. Upward revisions are likely to continue for next year, while there are many potential growth catalysts, including high consumption savings and strong corporate spending.
At worst, this delays some growth that would have occurred during the second half of 2021 next year, Melson said.
While the delta variant slows the economy a bit, the effect on activity “is not nearly to the point suggested by the University of Michigan index,” Markowska wrote. “The real-world impacts so far have been much more modest and amount only to a loss of momentum rather than a setback in economic activity.”
Read below: How Fidelity plays “Moneyball” in asset management
Sometimes we include links to online retail stores. If you click on one and make a purchase we may receive a small commission.