A personal view from Ian Stewart, Deloitte's Chief Economist in the UK. To subscribe and/or view previous editions just google 'Deloitte Monday Briefing'.
Please join me and our CEO, Richard Houston, for the Deloitte 'Back-to-School' Economics webinar today at 13:00 BST. I will examine the economic outlook and Richard will share his thoughts on prospects for business. After the sharpest contraction on record, activity has bounced back in the UK. But the risk of a further spike in COVID-19 cases, the withdrawal of furlough support, and uncertainty over Brexit loom large. Is it possible to restart the economy and suppress the virus? Is the worst past for the global economy? How are firms navigating this period of elevated uncertainty? To join the discussion, please register now at: https://event.webcasts.com/starthere.jsp?ei=1366214&tp_key=52ce65c4ce
COVID-19 case rates are rising while fatalities remain relatively low across much of Europe. This week’s Briefing looks at what is happening.
Levels of deaths in most of Europe are running at a fraction of the levels seen at the peak. In the UK, for instance, the seven-day moving average of daily deaths peaked at 942 in mid-April. As of Saturday it stood at 11. The University of Oxford reports that the ratio of fatalities to recorded cases in England was 1.5% in early August, down from over 6% in June.
Improved testing and management of the pandemic and better treatments seem to be behind the reduction in the fatality rate.
In the UK, daily testing has risen from the low thousands to around 170,000, leading to better measurement of infections and more accurate estimates of the case fatality rate. Increased testing and contact tracing have also improved diagnoses of asymptomatic cases, leading to better compliance with isolation rules.
In the initial stages of the pandemic, policy focused on keeping hospitals functioning and avoiding overloading the system. Older patients were released from hospital into care homes, and, with little testing and shortages of personal protective equipment (PPE), deaths among residents rose. This pattern was seen in the UK, Sweden, the Netherlands, Spain and Belgium.
With improved testing, PPE and management, deaths among older patients have fallen. In Europe and the US the pandemic has increasingly been driven by the under 40 age group who have far lower fatality rates. (Researchers at Imperial College London estimated that those aged 15-44 have a 0.03% chance of dying from COVID-19. This rises to over 11% for those aged over 75.) Analysis of German data suggests a broad-based improvement, with fatality rates declining across all age groups over the summer months, although older age groups have driven the overall reduction.
In March and April, national lockdowns were the weapon of choice against the virus. Since then the scaling up of testing, and a focus on hotspots, has produced more timely and granular data. Local controls are now the main weapon in containment. (The latest data show that in the worst affected area of England, Bolton, the case rate is 122 per 100,000, more than six times the 20 per 100,000 level that triggers a quarantine for those returning from overseas.)
The fall in death rates is not solely due to improved shielding and testing. Medical advances have played a role too. Dexamethasone, a cheap and widely available steroid now at the frontline of COVID care, has been shown to cut deaths by a third among critically ill patients. Other drugs such as remdesivir and interferon-beta have also shown promising results, raising recovery rates and reducing the time to recovery in trials. Simple techniques, including changing settings on mechanical ventilators, laying patients in a prone position and better use of oxygen, have helped improve outcomes.
And yet the risks posed by the virus are on the rise. Cases are rising again, though in the UK they remain low relative to the actual peak in April (because of limited testing the UK case rate in early April was likely to have been ten to twenty times higher than the reported one). In the UK, death rates, ICU usage and hospital admissions are low but edging upwards.
The pace of increase of cases in the UK has accelerated and, seen on a log scale, is starting to look like the ascent Spain experienced in July. A rise in the proportion of positive tests suggests that this is not just a case of higher levels of testing revealing more cases.
The most accurate guide to the actual number of cases comes not from the daily testing numbers but from a fortnightly survey conducted by the Office for National Statistics (ONS). It has recorded a rise in the infection rate to about 1 in 1,400 people, up from 1 in 2,000 two weeks earlier.
The ONS estimate of R, the number of people each infected person in turn infects, has risen from 0.9–1.1 to 1.0–1.2, meaning that the pandemic is expanding. Research by Imperial College suggests that R could be as high as 1.7 in England.
Worryingly, almost 80 local authorities in England are seeing cases above the 20 per 100,000 threshold. While cases are highest in the young, they are rising for those in middle age.
This rising case rate does not even include the impact of the reopening of schools, universities and a growing number of workplaces. Colder weather, an increase in indoor interactions, and the arrival of the flu season add to the risks.
The great concern is that, in time, rising case rates among young people will reach vulnerable and elderly groups. There is some evidence of this in Spain and growing worries about the potential for the virus to re-establish itself in care homes in the UK.
There is nothing inevitable in this. On linear plots of new infections, which many of us will have seen, growth seems to have taken off quite dramatically. But plotting exponential variables, such as new cases, on a logarithmic scale provides a better idea of the rate at which infections are rising (or the time taken for them to double). On these measures, current rates of spread in the UK are accelerating but remain below those seen in March.
Intelligence on the spread of the virus, adequate supplies of PPE and improved shielding of vulnerable groups will be key to preventing a second wave.
Early action – and public compliance – is vital. Professor Neil Ferguson of Imperial College estimates that had the UK locked down one week earlier the number of deaths could have been halved (back then, the weight of scientific advice seems to have been that the UK was some weeks behind Italy and that locking down too early risked behavioural fatigue at the time of maximum risk).
Economies which have suppressed the virus without resort to full lockdowns, particularly through testing and tracing, have seen lesser contractions in activity than those, like the UK and Spain, that have had to curtail mobility significantly. A second full lockdown, in an already weakened economy, would likely be even more damaging than the first one.
Last week we polled an audience of about 750 people on our fortnightly COVID-19 webinar as to whether the UK would be able to avoid a second, whole-economy lockdown. Two-thirds thought that it would avoid this outcome.
I tend to agree. Applying the lessons from the first phase of the pandemic offers the hope – but not, of course, the certainty – of better outcomes for human health and for economic activity.
The daily case and fatality data are set to move centre stage again. Viewing them on a log scale helps better capture rates of growth and identify points of inflection. For a full picture we’ll also keep a close eye on less prominent series, including the fortnightly ONS survey and data on hospital admissions and ventilator usage. Please drop me a line if you’d like me to send you the links to the data series we watch.
The pandemic has made amateur epidemiologists of most of us. Rarely has human health mattered as much for the economy as it does today. The path of the disease, and our success in containing it, holds the key to economic activity.
For the latest charts and data on health and economics, visit our COVID-19 Economics Monitor: