It comes as no surprise that the COVID-19 pandemic is still reshaping economies around the world, especially with new variants of the virus emerging. Global shares have already seen a drop as investors are increasingly more concerned about a surge in Delta variant cases and their potential impact on economic recovery. Although the US economy has already proved resilient in the face of the pandemic and of the crisis that followed, many signs now point to new problems. The US economy was expected to grow in 2021 at its fastest pace since the 1980s, but new healthcare concerns might hinder that growth.
Price pressures are among the first to change due to the global crisis, and the ongoing COVID-19 pandemic is no exception to the rule. US consumer prices rose in July, albeit at a slower pace. Multiple signs also pointed to inflation peaking last month, with businesses across the country now affected by supply-chain disruptions. According to the Labor Department, the consumer price index rose 0.5% in July, after gaining 0.9% in June. Although not all market signs point to a difficult end to 2021, worries about the Delta Variant and its impact on the American economy are now on the rise.
Global Problems
The American economy is not alone in facing new threats as Delta variant cases continue to multiply. According to CNN, China’s economic recovery is also facing a standstill. In July, new reports about China’s manufacturing sector, investment, and retail sales were recently released by the country’s officials. This data seems to paint a different picture compared to that of the previous months. July’s industrial production growth was the lowest in the last 11 months, rising by just 6.4% from 2020. Car production was also delayed by a global shortage of semiconductors, while retail sales faced their weakest rise this year. With signs now pointing to a slowdown, the Chinese economy seems to be facing numerous problems.
Europe’s economic recovery also seems to depend on the evolution of the pandemic, with many consumers still unwilling to be more relaxed about spending. Shopping behavior during the summer of 2021 seems to stack up against that of 2020 when customers seized the moment and indulged after the end of the first COVID-19 lockdown. In sharp contrast, European consumers seem to worry that the pandemic will continue for much longer than they had initially expected and, as a consequence, prefer to abstain from spending. According to a new study, those living in the United Kingdom are not yet comfortable taking vacations abroad or attending large public gatherings, such as concerts or sporting events. However, the same study shows Britons feeling comfortable engaging in many other activities the way they used to do before the pandemic.
Finding Meaning in Uncertainty
While news around the world seems to point to inconsistent economic results, it may be safe to say these results are indeed a consequence of the COVID-19 pandemic. The crisis altered shopping habits everywhere, and the emergence of the new Delta variant might do the same. Retail sales dropped by 1.1% between June and July in the US, but is the drop just a consequence of growing Delta Variant concerns? The answer might prove to be just as complex as the many uncertainties plaguing the market. Some companies go as far as to say that rising prices may have influenced shopping habits more than actual healthcare concerns, while others only focus on the future of the pandemic. Even as investors seem to be following the new wave of infections with unease, many retailers remain optimistic, beat estimates, and raise their sales forecasts.
The spread of the Delta variant and other new variants of the virus raises concerns among investors and analysts because it has the potential to impact economic recovery in the US, China, Europe, and across the rest of the globe. However, as US retailers’ predictions seem to show, that impact is not necessarily direct. With hospitalizations and deaths now on the rise in the US, and oil prices extending their drop in August, Delta variant concerns might prove to impact the economic recovery in new and unfamiliar ways, just like the initial COVID-19 pandemic did in the beginning.
