LATE NOVEMBER almost began to feel like the early days of the pandemic all over again. Global stockmarkets fell by 5% as news of what would come to be known as the Omicron variant filtered out and investors feared either another round of restrictions, or that people would voluntarily shut themselves away. Haven currencies, such as the dollar and the yen, strengthened. The price of oil slumped by about $10 a barrel, the kind of drop often associated with a looming recession. Two months on, the impact of Omicron is slowly coming into focus. So far it is, largely, better than feared. On January 18th the price of a barrel of Brent crude oil approached $88, its highest level in seven years. Although global stockmarkets have sold off in recent days and are at the same level as in late November, that seems to reflect worries over higher interest rates rather than covid-19. Goldman Sachs, a bank, has constructed a share-price index of European companies, such as airlines and hotels, that thrive when people are able and willing to be in public spaces. The index, a good proxy for anxiety about covid-19’s economic impact, has surged relative to wider stockmarkets in recent weeks. High-frequency economic data back up the cautious optimism. Nicolas Woloszko of the OECD, a rich-country think-tank, produces a weekly GDP index for 46 middle- and high-income economies, using data from Google-search activity on everything from housing and jobs to economic uncertainty. Adapting his index, which has proved to be a good predictor of the official numbers, we estimate that GDP across these countries is currently about 2.5% below its pre-pandemic trend (see chart 1). That is a little worse than in November, when GDP was 1.6% below trend, but is still much better than the situation a year ago, when output was nearly 5% below it. A few factors explain why the worst fears about the global economy have so far not come to pass. The great uncertainty with Omicron relates to whether the bad (greater transmissibility) outweighs the good (lower virulence), and thus whether there is a damaging surge in hospitalisations and deaths from covid-19. So far, though, few governments apart from China’s, which is wedded to its zero-covid strategy, seem to believe that drastic restrictions on people’s movements are required. A quantitative measure produced by UBS, a bank, ranks global restrictions from zero to ten and finds that the average global score has risen from 3 to 3.5 in recent weeks. Only one rich country, the Netherlands, moved into a proper lockdown (though this was partly lifted on January 14th). At the start of the Omicron wave economists feared that renewed lockdowns in key manufacturing nodes such as Vietnam and Malaysia would aggravate supply glitches. So far governments in both countries have kept restrictions laxer than they were a few months ago, though case numbers in both places remain relatively low. UBS also finds that the share of international travel routes with covid-related entry restrictions, at 31% globally, has barely budged since October. More people also seem happy to take risks. Goldman Sachs produces an “effective” lockdown index, which takes into account not only governments’ diktats but also people’s choices. So far its global index has tightened to about the same level as during the global Delta wave of last summer, despite four to five times as many daily infections. Even in places where the rapid spread of covid-19 is a novelty, people are largely carrying on as normal. Cases in San Francisco were in the low double digits for most of the autumn. Although the city now averages about 2,000 a day, gyms and restaurants remain busy. Today’s case numbers suggest that about 5-10% of Americans currently have covid-19. Such high prevalence has created a new difficulty that did not exist with previous variants: a widespread absence of workers. According to a survey of households conducted at the turn of the year by the Census Bureau, 8.8m Americans were out of work because they were caring for someone with covid-19, or because they had the disease themselves. At the end of 2021, 138 National Basketball Association players were unable to work for covid-related reasons, though this number has since dropped. In San Francisco a small but growing number of shops, already struggling with a labour shortage lasting months, are closing early for lack of staff. Measuring the effect of such absences on output is hard, but it looks likely to be limited—and short-lived. For a start, several factors might offset their impact. Some of those isolating will work from home. If a restaurant is closed prospective diners may still have other places to go. And for a time at least, co-workers who are uninfected can take up some of the slack. The overall drag could therefore be modest. Research published on January 10th by JPMorgan Chase, another bank, for instance, speculated that absences could reduce British GDP in January by 0.4%. Moreover, with case numbers falling in both Britain and some cities in America, Omicron’s economic effects look likely to fade rapidly. Forward-looking surveys also suggest that firms are not too worried. There is little sign, for instance, of a decline in business confidence (see chart 2). Despite a better overall performance than expected, the global economic recovery from the lockdowns of 2020 is still uneven. The gap between the best and worst performers is as wide as it has ever been. As South Africa’s Omicron wave has collapsed, GDP has risen and is now in line with its pre-crisis trend. Britain’s economy seems to be recovering strongly too. Other places are still struggling, whether that be because of a slow booster roll-out, low population immunity or just bad luck. According to the OECD’s measure, the Spanish and Greek economies are still an astonishing 10% smaller relative to pre-covid trends. Omicron has not done too much to knock the recovery off course. But some places still feel a long way from normal.
