The Recovery Is Stalling

3103The Recovery Is Stalling

Jeffrey Viksjo CFA

In Western New York, things undoubtedly feel better. Restaurants are opening, little league teams are playing baseball and infection rates remain very low. But that is not the case elsewhere in the country. Many southern states (Florida, Texas, Arizona, etc.) are seeing huge spikes in infection rates, leading to new lockdown measures. So how does an investor reconcile these two parallel universes? What is the true story of the health of the U.S. economy?

 

The below chart from Capital Economics looks at the recovery in consumer spending using some unique data points, including air travel (per the TSA), restaurant dining (based on OpenTable) and hotel occupancy.

 

The picture is clear. While all measures rebounded sharply off the March/April lows (when most of the country was in full lockdown mode), that recovery has now stalled as infection rates have climbed throughout most of the country. Hotel occupancy remains 40% below last year’s levels, while restaurant dining and air travel remain 60% and 75% below last year’s levels, respectively.

 

In other words, things have improved, but we still have a long way to go. And if the virus isn’t controlled in parts of the South, or a second wave hits the Northeast, things could get a lot worse, before they get better.

 

Chart showing discretionary consumption indicators - hotel, restaurant, air travel

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