Goldman Says Economic Impact From Delta Will Likely Be "Modest"

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by Tyler Durden
Tuesday, Jul 13, 2021 - 09:05 PM

Now that the Delta Variant is officially the fastest spreading COVID strain in the US, a team of analysts at Goldman Sachs who have been trying to forecast the impact of Delta on the global economy declared last week that emerging economies with low vaccination rates are the most vulnerable to Delta-induced lockdowns and other economy-crushing containment measures.

However, in heavily vaccinated countries like the US and UK, the analysts pointed out a newfound discrepancy: while Delta is driving new cases higher in places where restrictions on movement and business have recently been lifted, the number of new hospitalizations and deaths have remained subdued, and shown little correlation with any rise in confirmed cases.

This dynamic hasn't changed much in the past week, even as the pace of new cases has accelerated dramatically. Goldman offered an updated chart detailing the spread of the virus in the UK.

In their latest note, the Goldman team assesses the potential economic fallout should the US experience a surge in new cases on par with what the UK has recorded over the past few weeks as PM Boris Johnson prepares to lift the last restrictions in place in England.

Their conclusion? Any economic fallout from Delta would likely be modest. First, high vaccination rates will provide protection against severe infections and deaths.

Second, consumer activity in the UK saw a negligible dip over the past several weeks and survey suggest consumers haven't meaningfully pared back consumption or riskier activities like dining out.

And finally, high-frequency measures of consumer spending and restaurant bookings in the US have responded very little to new virus cases.

While the US media has focused almost obsessively on the small number of states where vaccination numbers have trailed, the fact remains that the US has seen vaccination rates rise rapidly since last winter, making it one of the most heavily vaxxed countries in the world (outside Israel).

As a result, the economic effects of a viral resurgence are likely to be mild, with only the most virus-sensitive sectors, like international travel, likely to be impacted.

What's more, UK surveys of consumer behavior show little change during the month of June.

As it turns out, changes in the rate of spread haven't shown much correlation to consumer spending so far this year.

The Goldman team dug deep on this. Goldman even regressed city-level restaurant bookings (an increasingly popular data set from OpenTable) on the same levels of pandemic severity from June through early July and found no significant relationships. 

While it's possible economic data could see a more intense decrease should COVID numbers rise dramatically, from what economists have been able to glean from the data so far, the impact from Delta will likely be modest, if not mild.

Delta is believed to be twice as transmissible as the original strain that caused last spring's first wave. This would suggest that the immunity threshold would be 80% to 85%.