An eerie Olympics casts a shadow on recovery

Celebrations are muted in Tokyo ahead of the Olympics as they grapple with another wave of the virus. Elsewhere in the world, there is a mixed pattern of recovery among economies and sectors with digital companies likely to continue to benefit from changes to social and working life.

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  1. Charles Stanley

It wasn’t meant to be like this. The Japanese government and the Olympic Committee hoped that by postponing the games for a year they would be able to open in 2021 in high summer in Tokyo for a full-hearted celebration of sport and world entertainment. Instead, we now learn these games will uniquely have no cheering crowds, no spectators at all beyond the immediate support teams for the athletes performing and the officials presiding. Japan has faced another wave of viral spread and has emergency measures in place in the crucial Tokyo prefecture which contains the Olympic stadium and many of the venues. The emergency has been extended in both Tokyo and Okinawa beyond the end of the games. Those who do go to watch the events will be asked not to shout or sing, but to limit their appreciation to clapping.

It will act as a reminder to investors around the world that the pandemic is not over, and is still having a scarring effect on many economies around the world. South Korea has recently announced a strengthening of its measures to enforce more social distancing. In the EU, some controls remain in place in many countries. Most countries are still a long way off full vaccination of their adult populations, with some battling resistance by people to any vaccine and many struggling with limited supplies. In Japan, the aim is to have everyone over the age of 65 vaccinated before the games begin, but past problems with vaccines for other conditions have led to some hesitancy and delay in clearing the Astra product for use.

According to the official figures reported on Worldometer, there have now been 198m cases worldwide or 2.6% of the population, and 4 million deaths or 0.05% of the population. The death rate of those catching the disease is 2%, heavily concentrated in older people who often have other medical problems. Relative to the USA at 1873 deaths per million there are 20 countries that have experienced more deaths. These are heavily concentrated on the continent of Europe, especially in the arc from Poland through Slovakia and Hungary to the Balkans. Three Latin American countries, led by Peru, have also had high death rates. There has been no satisfactory explanation of why the virus should have had such a pattern of impact. It does not seem to be easily related to the policy followed in response to the pandemic, as many with high death rates have locked down hard and for a long time. Vaccination rates will now play an increasing part in limiting death rates in countries with high vaccination rates and the converse in low-injection countries. There is plenty of evidence that vaccination does reduce the risk of a serious case and of death substantially for the individual taking the treatment.

The results are often reported in terms of total deaths. There the EU/EEA leads the way with 740,000, followed by the USA at 623,000, Brazil at 537,000 and India at 412,000. This does not give a meaningful picture as it is unadjusted for the size of the population - but does shock with the scale of the tragedy in the larger countries.

All this means a more mixed pattern of recovery, with some sections of travel, hospitality and entertainment still partially impaired by rules and by worried people not wishing to place themselves at risk. It also means the digital revolution has something to offer, as it will affect people’s pattern of social life and working even as more of the controls come off. In the UK, there is no general rush back to work in the office planned for next week despite the change in guidance, with many companies looking to September before expecting a bigger turnout. Many companies in the advanced world are looking to establish new patterns of hybrid working and to respond to those employees who think a long commute gets in the way of effective performance if required every day. All this has continued knock-on effects on City centre hospitality and retail.

Adjustment is going to take some time, as understandably many businesses are not sure what mixture of online and in-person will become established. All this points to more balanced market performance, with more need to concentrate on individual sector and company profit and turnover performance at a time of continuing fast change. Some digital business models will benefit more from these changes, whilst some companies in recovery areas will struggle with the debts and lost business they experienced during a long lockdown.

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