Macro insights

Coronavirus and the measure of mobility

We should see a partial rebound in economic activity as measures to contain coronavirus are gradually eased in many economies – and people start to move around more. But normalization may be gradual and should not be mistaken for a V-shaped recovery.

Sources: BlackRock Investment Institute and Google, with data from Haver Analytics. Notes: The chart shows the services purchasing manager’s index (PMI) for the U.S., Germany, France, Italy and the UK and the Google consumer mobility scores (data for retail and recreational activity) for those countries. The chart only shows the U.S. and the UK data for May, the latest data that is available.

Government-imposed measures have restricted mobility in recent months. But the lifting of those restrictions does not necessarily imply a complete recovery in mobility to pre-virus levels. A partial rebound in mobility should support a bounce-back in both global service sector activity (see chart above) and the manufacturing sector. Over the past few months, purchasing managers’ index (PMI) data for the U.S., Germany, France, Italy and the UK have been closely correlated with data from Google’s coronavirus mobility reports. Services data reflect retail and recreational mobility, while manufacturing data correlate with mobility in work and transit locations. Yet a recovery in mobility alone is not enough to lift the PMIs back toward the 50 level that separates contraction from expansion.

Other factors may also continue to weigh on activity in the months ahead. First, policymakers are reopening economies with caution given the health risks associated with a misstep. Most countries may only gradually move towards a “new normal” that includes some social distancing and new workplace safety restrictions – particularly for high-contact occupations. Second, a visible dent to private sector confidence suggests that some consumers may run a higher rate of precautionary savings if they believe their jobs are at risk. Companies might decide to hold higher levels of cash on their balance sheets and keep hold of more stock to buffer supply chain risks. Third, countries that have started to normalize earlier – such as China, Germany or Austria – may face external headwinds as their key trading partners keep stricter containment measures in place.

High-frequency data for the U.S. and Europe show only timid signs of normalization. In the U.S., most measures of industrial activity remain depressed and have only just moved past their troughs. Measures of consumer spending also remain close to recent lows. Data for mortgage loans and initial unemployment claims are slightly more encouraging – both have shown some signs of improvement in recent weeks.

A similar picture emerges in the Europe, where electricity usage and truck mileage through Germany have improved only slightly. After restaurants started to reopen in Germany, bookings began to pick up marginally but were still operating at around 90% below normal in early May. But as countries with stricter lockdowns – such as Italy and Spain – open up, high-frequency indicators may show a more meaningful improvement in the coming weeks.