An increasing amount of GDP is accounted for by counties with rising fatalities, a slight change from a couple weeks ago.

Top: Share of GDP coming from counties with rising new cases (dark blue), deaths (light blue). Bottom: GDP in billions of 2012$, SAAR (blue). Sources: DB, Covid Impact Tracker , 19 August 2021, and IHS-MarkIt, release of 2 August 2021.

I’ve stacked the two graphs so that one can get some idea of how the waves correlate with the pace of recovery. It’s hard to see a clear pattern, except in the first wave where the decline affected counties correlates with a very rapid recovery in economic activity as measured by monthly GDP as estimated by IHS-MarkIt.

On Aug. 18, Goldman Sachs downgraded Q3 growth estimates from 9% to 5.5%, partly on delta variant concerns. Recently, Wells Fargo observed:

Delta Variant Clouds the Outlook

The Delta variant in the United States has cast a cloud over the outlook. New daily cases continue to move higher and are at their highest level since February. Hospitalizations are on the rise, too, amid the more virulent strain, and this week brought reports that some states are nearing full capacity for intensive care beds. From an economic perspective, it remains to be seen how activity evolves during this latest outbreak, with the surge in cases beginning in late July. High-frequency measures on seated diners and the number of people through TSA checkpoints suggest service activity has plateaued but not materially deteriorated thus far (see chart). The sideways move in activity, in conjunction with weaker-than-expected retail sales in July, suggests some downside risk to our personal spending estimates for the third quarter.

So far, the implications are for modest reductions in predicted growth rates, rather than large. As of Aug. 19, the annual growth rate implied by the (13 week average of the) Weekly Economic Index (WEI) is 9.53% for a hypothetical quarter ending Aug. 14. That’s still strong growth, nationwide.