Omicron Variant Causes Less Economic Damage in Europe Than Expected

A Financial Times analysis of high-frequency data shows that the Omicron variant of Covid-19 is having a significantly less severe impact on the European economy than previous waves of the pandemic. This is largely due to high vaccination rates and society's improved ability to live with the virus. While infection rates have risen to their highest levels since the pandemic began, economic indicators such as cinema ticket sales, hotel bookings, job postings, and mobility data have fallen far less than in previous surges. In fact, visits to shops, bars, and restaurants have dropped by less than half the amount they did this time last year, according to Google mobility data.

Key Takeaways:

• The economic impact of the pandemic is fading by the wave, according to Bert Colijn, economist at ING, with high levels of mobility being positive for economic activity.
• Economists' growth predictions suggest that despite Omicron, the eurozone's economy will still have expanded around 0.2 percent during the last quarter of 2021 and again in the first quarter of this year, as forecasted by Silvia Ardagna of Barclays.
• Eurozone unemployment has already dropped to below its pre-pandemic average in November 2019, and is expected to fall to levels not seen before, as predicted by Claus Vistesen of Pantheon Macroeconomics.
• Consumer services have been particularly hard hit, with European cinema revenues being 20 percent below the same period in 2020, and German restaurant bookings 30 percent lower than in 2019.
• Despite this, tourism and international travel remain weak, with flights down 35 percent on 2019's pre-pandemic rates and hotel bookings falling back to levels last seen in the spring of 2021.
• Restrictions have largely targeted the unvaccinated and those who have not already fallen ill, minimalizing the impact on the economy.

Statistics:

• Infections rates across the eurozone have risen to their highest levels since the pandemic began.
• Cinema ticket sales have fallen far less than in previous infection surges.
• Visits to shops, bars, and restaurants have dropped by less than half the amount they did this time last year, according to Google mobility data.
• Eurozone unemployment had dropped to below its pre-pandemic average in November 2019.
• German restaurant bookings were 30 percent lower in mid-January than at the same time in 2019.
• Flights are down 35 percent on 2019's pre-pandemic rates.
• Hotel bookings have fallen back to levels last seen in the spring of 2021.

Sources:

• Financial Times
• ING
• Barclays
• Pantheon Macroeconomics
• Google mobility data
• Box Office Mojo
• Sojern
• Nomura
• Capital Economics
• UBS Global Wealth Management