Overview
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One of the tools Fidelity International’s investment teams have been leveraging is Google’s Global Mobility data, which recently has been showing how far below ‘normal’ the daily visits to certain regions are. We focus on the number of visits to workplace, transit hubs, and leisure-and-retail (excluding pharmacy and grocery) locations, taking a weekly average, then normalising the data to account for the fact that a full lockdown seems to reduce GDP versus baseline by around 20 per cent. This metric is obvously not perfect, as online activity can only replace the physical to an extent and, for example, people who can drive cars instead of using transit hubs are more likely to do so. But it is still useful as an immediate proxy of economic activity, as seen in this week’s Chart Room.
The chart shows two ‘frontiers’ of economies functioning about as normally as they can until the nature of the virus changes, and containment measures start to impact. The best case scenarios appear to have been in places like Taiwan and South Korea - economies that enforced prolonged border closures, displayed low active domestic caseloads, and demonstrated solid test-and-trace capabilities. It is also worth noting that these economies have strong manufacturing bases, and relatively less dependence on tourism. Here, the economic hit seems to be much less than that of a full Western-style lockdown.
A ‘Sweden-style’ approach may be a more viable option for many Western states from an economic perspective. The Scandinavian country has kept restaurants open, although socially distanced, but has seemingly avoided explosive virus dynamics. This still involves a large hit to the economy, but perhaps only one-third of the pain of a full lockdown.
It is also notable that in the past week or so, many European economies are showing signs of a pickup in activity. An exception for now is the UK, which appears to be a relative laggard. It will be interesting to watch Switzerland, Germany and Austria as they appear to be recovering most rapidly, hopefully while avoiding a much-feared second wave outbreak. We also may be at the start of an upward inflection in Australasia and ASEAN nations, where the virus seems relatively well-controlled.
