During the outbreak of Covid-19, economic activity is being determined by virus response rather than slower-moving traditional industrial cycles. Economists and investors need to adjust their toolkits accordingly.
In this week’s Chart Room, Ian Samson, assistant portfolio manager, Fidelity International, discusses the team’s innovative use of Google’s Global Mobility data.
Samson said, “One of the tools Fidelity International’s investment teams have been leveraging is Google’s Global Mobility data, which recently has been showing how far below ‘normal’ the daily visits to certain regions are.
“We focus on the number of visits to workplace, transit hubs, and leisure-and-retail (excluding pharmacy and grocery) locations, taking a weekly average, then normalising the data to account for the fact that a full lockdown seems to reduce GDP versus baseline by around 20%.
“This metric is obviously not perfect, as online activity can only replace the physical to an extent and, for example, people who can drive cars instead of using transit hubs are more likely to do so. But it is still useful as an immediate proxy of economic activity, as seen in this week’s Chart Room.
“One of the tools Fidelity International’s investment teams have been leveraging is Google’s Global Mobility data, which recently has been showing how far below ‘normal’ the daily visits to certain regions are. We focus on the number of visits to workplace, transit hubs, and leisure-and-retail (excluding pharmacy and grocery) locations, taking a weekly average, then normalising the data to account for the fact that a full lockdown seems to reduce GDP versus baseline by around 20%.
“This metric is obviously not perfect, as online activity can only replace the physical to an extent and, for example, people who can drive cars instead of using transit hubs are more likely to do so. But it is still useful as an immediate proxy of economic activity, as seen in this week’s Chart Room.
“The chart shows two ‘frontiers’ of economies functioning about as normally as they can until the nature of the virus changes, and containment measures start to impact. The best case scenarios appear to have been in places like Taiwan and South Korea – economies that enforced prolonged border closures, displayed low active domestic caseloads, and demonstrated solid test-and-trace capabilities.
“It is also worth noting that these economies have strong manufacturing bases, and relatively less dependence on tourism. Here, the economic hit seems to be much less than that of a full Western-style lockdown.”
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