How is Omicron affecting the global economic recovery?

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The worst fears about the global economy have so far not come to pass. We explain why

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.

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 .

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 . 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.

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.

 

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