COVID Surge Stalling Europe’s Recovery

Posted by lplresearch

Economic Blog

We continue to monitor real-time COVID-19 and economic data to provide insight into how the pandemic is affecting economies around the world. Traditional economic data sometimes can be too slow to pick up the changes that are occurring. Today we focus on Europe.

“The high-frequency data shows that the recovery from COVID-19 related economic disruption is happening at a different pace in different parts of the world,” said LPL Financial Chief Market Strategist Ryan Detrick. “Governments globally, but especially in Europe, are struggling with managing reopening economies while also controlling the spread of the virus.”

In recent weeks much of Europe has been facing a sharp increase in COVID-19 infections: Over 700,000 new cases were reported by European nations last week, the highest number since the start of the pandemic. This has led to partial lockdowns or curfews in France, Spain, and the United Kingdom (UK) as local governments impose tougher restrictions on regions and cities with higher infection rates.

Using data from the online restaurant booking system Opentable, we see that Germany, Ireland, and the UK all quickly recovered to pre-pandemic levels once lockdown restrictions were lifted. Later in the summer, the UK and Ireland were even able to vastly outpace last year, thanks in part to local promotions such as the UK government’s “Eat Out to Help Out” campaign. However, both countries have seen recent declines in restaurant bookings as local infections have risen, people have become less comfortable eating out, and restaurants and pubs are forced to reduce hours. Germany has also seen a decline in diners since mid-summer highs. These countries’ trajectories are very different from the United States where the recovery in dining out has been slower but steady.

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The data on the number of in-person shoppers visiting Europe’s busiest shopping centers also showed sharp recoveries after the first round of lockdowns were eased, and that the recovery has struggled to maintain momentum and seen declines since mid-August. The new lockdown measures in the UK and France will likely put further pressure on these brick-and-mortar retailers in coming weeks.

View enlarged chart.

Driving congestion data, from the location technology company TomTom, shows that Germany had a relatively quick return to pre-pandemic levels of traffic and France had just reached similar levels before declining in the last week. The UK, Italy, and Spain have all shown recoveries from earlier lows, but they’ve started to level off, or decline, recently. This contrasts again with the US data that has been slowly grinding higher since the end of March.

View enlarged chart.

The high-frequency data is starting to reflect the increasing spread of COVID-19 in Europe, which strengthens our view that we expect economies in Europe to contract more in 2020 than the United States or Japan, which has been supported by a very aggressive stimulus response. We continue to favor emerging markets equities over those in developed international markets, with China’s apparent success in containing the virus and reopening its economy a key factor.

LPL Research continues to monitor high-frequency data from around the globe and will keep you updated, real-time, as this changes.


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All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

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