US Macro: Delta wave looks to be peaking… – Coronavirus cases and hospitalisations remain stubbornly high in the US, particularly in states where vaccination rates are relatively low – mostly southern and Republican states where vaccine hesitancy is most prevalent. Indeed, the data shows that some 40% of hospitalisations are in Florida and Texas alone.

These states continue to resist even economically harmless measures such as mask mandates, let alone re-imposing restrictions on economic activity. Policymakers are likely banking on vaccinations to ultimately blunt the current wave of infections and therefore prevent hospitals from being overwhelmed.

While the vaccination rate in the US is indeed lower now than in most European countries, it is still high at 114 doses per 100 people (EU: 121 doses), and continues to rise at a solid pace of 0.3% of the population per day. The data suggests vaccines are indeed blunting the Delta wave; although cases and hospitalisations remain on the high side, they are no longer accelerating, and look to be peaking (see charts below).

US vaccinations are now lagging those in Europe, but Delta wave looks to be peaking
Left figure: Vaccine doses per 100 people; Right figure: Covid-19 hospitalisations and daily cases

Source: Datastream, Bloomberg, ABN AMRO Group Economics

…and the impact should be short-lived – While lockdown restrictions look highly unlikely in the US, consumers are nonetheless becoming more cautious; the Michigan consumer sentiment index plunged in August to a near 10-year low, driven by a sharp fall in the forward-looking expectations component.

At the same time, high frequency data in the most pandemic-sensitive travel and hospitality sectors shows the recovery is stalling, with both air travel and restaurant dining holding stubbornly below pre-pandemic levels.

With that said, consumption remains remarkably strong elsewhere in the economy, with retail sales still significantly above the pre-pandemic trend. We expect a reversal of this growth pattern over the coming months. Assuming the Delta wave is indeed now peaking, the services recovery is likely to regain some momentum, while goods consumption is likely to continue to correct following the stimulus-fueled surge of the past few months.

The correction in goods consumption could well be big enough to offset the ongoing recovery in services, leading to one or two months of aggregate falls in consumption. However, we expect such a rough patch to prove short-lived.