Omicron casts new shadow
Analysts say there isn’t enough data yet to determine if it is ‘good or bad for growth’
Just as Americans and Europeans eagerly awaited their most normal holiday season in a couple of years, the omicron variant unleashed a fresh round of fear and uncertainty — for travelers, shoppers, party-goers and their economies as a whole.
The Rockettes canceled their Christmas show in New York. Some London restaurants emptied out as commuters avoid the downtown. Broadway shows canceled some performances. The National Hockey League suspended its games until after Christmas. Boston plans to require diners, revelers and shoppers to show proof of vaccination to enter restaurants, bars and stores.
A heightened sense of anxiety has begun to erode the willingness of some people and some businesses to carry on as usual in the face of the extraordinarily contagious omicron variant, which has fast become the dominant version of the virus in the United States.
Others, though, are still traveling, spending and congregating with other people as they normally do, though often with a cautious wait-and-see perspective. Holiday air travel remains robust. Many stores and restaurants are still enjoying solid sales. And omicron has yet to keep audiences away from movie theaters in significant numbers. This past weekend, record audiences across all demographics flocked to theaters for the new “Spider-Man” movie.
“The movie theater has not yet been hindered by omicron,” said Steve Buck, the chief strategy officer of EntTelligence.
At the same time, no one knows yet what omicron will ultimately mean for the health of the Western economies, which have endured a wild ride of downturns and recoveries since early 2020.
“These mutations keep coming,’ said Robin Brooks, chief economist at the Institute of International Finance. “What is the probability that sometime we get a really nasty one? No one has any idea. This thing is mutating, and it’s very, very hard to say.’
Will omicron cause outbreaks at factories and ports, disrupt operations and worsen supply chain bottlenecks that have forced up prices and contributed to the hottest U.S. inflation in decades?
Will it mean people will hunker down at home again and spend less on services — restaurant meals, concerts, hotel stays — which could weaken the economy but potentially defuse inflationary pressures?
Will return-to-office plans for white-collar workers be put on hold indefinitely, deepening the hit to many cities’ downtown businesses?
Or will omicron prove a blip that scarcely slows what has become a surprisingly strong recovery from the short but intense pandemic recession? Spooked by uncertainty and fear of the worst-case scenarios, stock markets around the world sold off for three days before rebounding Tuesday.
“We don’t know whether this is good or bad for growth or inflation in the medium term,’ said Megan Greene, global chief economist at the Kroll Institute. “We just don’t have enough data yet.’
Unable to assess its longer-term consequences, businesses, consumers and policymakers have struggled to respond to the omicron threat.
One fear now is that omicron infections will further disrupt manufacturing and shipping, worsen the supply chain backlogs and keep inflation simmering. It could also increase consumers’ already intensified demand for goods, which would magnify the supply shortages.
“If everybody is freaked out that going to a bar or restaurant is going to land them in a hospital, they may continue to buy goods,’ said Greene, the Kroll Institute economist. “So that could exacerbate the short-term trend and make inflation worse.’