A handful of businesses over the past several weeks have said customers are closing their purses. Consumer confidence fell through the floor, and retail sales sank.
Yikes, right? Well, maybe not.
Job growth remains electric. Inflation has come off its highs, and the broadest measure of the economic activity showed considerable strength in the spring.
So what gives?
Economic data are a weird beast. On the one hand, it’s the best shot we have at learning about what’s going on. But month-to-month, these stats can be noisy, distorted by temporary factors. That makes it harder to see trends.
It’s too early to tell if the Delta variant is slowing the pace of the economic recovery enough to be concerned. Infection rates are reported nearly in real time, but economic data are always looking backward. Meanwhile, companies are looking forward, trying to judge how their customers might react to outside factors in the future. It’s a cloudy crystal ball at best.
Either way, the bottom line is this: The pandemic isn’t yet over. That means economic conditions keep evolving, maintaining businesses, consumers and the recovery in a chokehold.
What the data says
But here’s the good news: Economists are confident that the higher case numbers won’t lead to lockdowns like last year, particularly now that vaccines are widely available.
“The Delta variant is a relatively new wrinkle to a jobs recovery that has been uneven to date,” Nela Richardson, chief economist at ADP, told CNN Business. With companies keen to hire and take advantage of the reopened economy and many workers still hesitant to put themselves at risk, the mismatch between labor demand and supply will likely continue in the face of the variant.
That said, each resurgence in the virus has resulted in less and less economic damage, said Jack Janasiewicz, portfolio strategist at Natixis Investment Managers — not least because state and local governments have become hesitant to lock down their economies again, instead pushing vaccines and masking indoors.
It will be another two months until we get some bigger picture data with the third quarter gross domestic product numbers, the single broadest measure of economic activity. Until then, the jury is still out on how much of a mark Delta will leave on the pandemic recovery.
What businesses say
The reaction to Delta among American businesses isn’t unanimous, either.
“If you are concerned about Delta, the first thing you do is stop getting on planes or going to restaurants,” Michael Baker, a retail analyst at D.A. Davidson, said in an email.
That’s why hospitality and leisure, once again, will be worse affected by the resurgence in Covid cases than other areas of the economy, including shops.
But other major retailers that reported earnings last week remained cautiously optimistic regarding sales for the rest of the year.
“We’re seeing tremendous resilience in the consumer today. And our traffic patterns, I think, represent that, as we see this consistent flow of traffic into our stores,” he added.
So far, the Delta variant hasn’t yet altered customer behaviors, but the company is carefully monitoring the impact, executives said.
“There’s a heightened level of uncertainty as we look to the back half of the year with the Delta variant,” said the company’s CFO Jill Timm. “What is that going to do for consumer confidence?”