Economic Recoveries Vary in US, Europe, China

By datatrekresearch in Blog

Post-COVID economic recoveries look very different around the world. This is not just because the US is still dealing with regional flareups while Europe, for example, is largely past the worst of its outbreak. Rather, the difference appears to relate to how a region’s citizens adapt to longer term disruptions versus shutdowns/phased reopenings that existed for briefer periods of time.

Take, as a first example, traffic congestion in Beijing. Using our go-to information source, crowdsourced TomTom GPS satellite data, we can see how much road traffic has transited China’s capital city over the last week (solid red line), how much there was last week (dotted red line), and compare both to pre-COVID 2019 (dotted blue line).

Here is that data for the last week:

This shows us that:

• Beijing’s workers have almost entirely returned to offices, shops, and other places of business that operate on a typical workday. The 8am/4pm weekday spikes in congestion show that.
• But weekend traffic is still much lighter than in 2019, showing that consumer discretionary travel and spending are down significantly. We assume this stems from the natural caution consumers exhibit after a recession, compounded perhaps by uncertainty regarding the state of China’s export markets.
• Mid-day traffic, typically industrial in nature (manufacturing, retail/service sector inventory replenishment, etc.), also remains weak relative to 2019 levels.

Now, compare that chart to the same data for Berlin:

What we see here:

• Some workers are clearly still doing their jobs from home, since morning commute congestion is lighter than the 2019 average. Still, the gaps are not that wide between 2020 and 2019 morning traffic levels.
• But evening traffic (that bump at 4pm) is almost normal, indicating that consumer leisure activities like shopping and dining out have returned to their pre-COVID patterns.
• And weekend traffic congestion is also back to 2019 levels, another indication that Germans are out and about living a relatively normal life.

Before we move on to US city data, we would note that the Beijing/Berlin comparison is broadly representative of the difference between China and Europe’s post-COVID traffic patterns; if you want to dig deeper and look at other cities, all the data is here: https://www.tomtom.com/en_gb/traffic-index/

Now, let’s look at the latest data for the 3 largest cities in the US:

#1: New York

#2: Los Angeles:

#3: Chicago:

Three things pop out to us from the NY/LA/Chicago traffic timelines, all of which are very different from what we saw in Beijing or Berlin:

• First and foremost, American workers are not yet returning to offices anywhere near as much as their counterparts in China or Germany. We see that with 8/9am and 4/5pm traffic levels being so far from the 2019 measurements. This is not just in cities known for high-rise offices and densely packed floors (NY and Chicago), but in Los Angeles as well (and we see the same pattern in every other US city).
• Second, weekend traffic levels are nowhere near 2019 norms and there is little-to-no improvement here over the last week. That is bad news for the American service economy (think retail and leisure/hospitality) since it is a sign that consumers are not shopping or dining out as much during their weekend time off. The fact that we are in the middle of summer vacation season makes this observation even more alarming.
• Pulling these two points together, we wonder how much American life may be more permanently altered than what we see in either China or Germany/Europe. For example, in New York City (where DataTrek is based) we’ve been dealing with first COVID lockdowns and then slow reopenings for 4 months solid and the city won’t likely really get back to normal until there is a vaccine in wide circulation. Midtown remains extremely quiet and we suspect it will be that way for the rest of the year.

The investment takeaway from all this: the US’ slower response to COVID has shifted consumer behavior more noticeably than what we’ve seen occur in either China or Europe. We are hesitant to call this a permanent change, but without the certainty of a vaccine we also understand why markets will begin to assume there is a durable “new normal” to consider. How and perhaps “if” American K-12 schools reopen in a few weeks’ time will be the next issue to watch.