BlackRock Investment Institute

Macro insights

A shallower, longer second Covid-19 wave

Covid-19 cases have surged in the U.S. and Europe, yet we don’t see this as a replay of March and April. Why? The current wave has been significantly smaller and slower than the first wave after correcting for the greatly increased volume of testing. In addition there appears to be less of a trade-off between economic activity and public health. Our base case remains a shallower, longer second wave that is unlikely to have the same impact on mobility as the initial outbreak. Yet the hardest part of the restart – closing the gap to pre-Covid activity levels – lies ahead.

Change in Covid-19 cases and retail mobility for G7 countries

In the first three months of the pandemic, mobility plunged due to strict government lockdowns. Voluntary social distancing also played a role, according to the International Monetary Fund (IMF). Since June, rising cases have not had a major impact on mobility. See the chart. The absence of national government lockdowns is a key reason. The weakening relationship also suggests that measures such as mask-wearing, capacity limits and self-shielding allow a large share of activity to continue as cases rise.

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