The contagious and fast-spreading covid-19 delta variant is putting the pace of the U.S. economic recovery at risk and has already caused a slowdown in debit card spending, according to data compiled by Bank of America.
It could put the brakes on the planned U.S. escape route out of the pandemic, which was well underway when cases and hospitalizations began to spike in July despite close to 70 percent of adults being vaccinated.
The delta variant has been described as “covid on steroids”.
Economists and policymakers are closely watching a mix of anecdotal and high-frequency data, such as debit card usage, auto shows, and return-to-office calls by companies, for the impact of the variant, as they await traditional monthly indicators.
Data on the delta variant and how many Americans it infected caused the stock market to wobble as investors grew concerned about the global spike in covid-19 cases.
BofA economists Michelle Meyer and Anna Zhou wrote in a note Thursday that total spending using bank debit and credit cards “decelerated meaningfully” last week.
This means that U.S. shoppers’ spending is now at stake as the variant shifts consumer behavior going forward.
Accompanied by slowing vaccination rates, BofA economists said they “believe the current surge in cases could lead to a sharp pullback in services spending.”
Apart from consumer spending, they said the lack of government aid in the form of a stimulus check this time around could mean that Americans are hit harder than before.
The $4 trillion infrastructure proposal President Joe Biden is pushing to further stimulate the economy is at risk of being watered down in bipartisan negotiations.
The economists predicted that most states will likely respond to the surge in covid-19 infections by pushing people to get vaccinated. “Shifts in consumer behavior will determine how delta affects economic activity and experiences during prior waves may not offer the best guide,” they noted.
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