Merrill Lynch is downbeat on consumer recovery from the virus - spending will likely remain highly impaired

Author: Eamonn Sheridan | Category: News

A note from Merrill Lynch comparing Denmark and Sweden which points to a significant implication according to the analysts.

Denmark and Sweden
  • the two countries diverged significantly in terms of health care outcomes
  • Denmark had 95 deaths per million people
  • Sweden had 363 per million (among the highest COVID-19 mortality rates in the world)
  • difference points to a large healthcare benefit from lockdown policies
What about the economic costs?
  • consumer spending dropped by 25% in Sweden
  • by 29% in Denmark
  • The 4pp difference between the two declines quantifies the cost of lockdown policies
  • 4% of consumer spending is not trivial, it is a small share of the total decrease in consumer spending
  • Therefore the data indicate that most of the slowdown occurred due to voluntary social distancing rather than lockdown policies.
If the paper's results are applicable to other countries … implications:
  • Even as restrictions are lifted, consumer spending will likely remain highly impaired, with services getting hit the hardest
  • In summary, the economic downturn has been primarily because of the virus, not the policy response.
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'Services hit the hardest' is what we are seeing in the data for Asian countries that are ahead of the curve on recovery. 


See here for global coronavirus case data
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