The economic recovery arrived at the Delta. That is, in the face of the new variant of the virus, almost three times more contagious than the original version that turned our lives upside down a year ago. From here on, the branching of possible (for) courses of socio-economic events opens up.
Do you have the Po in mind? North-east of Ferrara, the longest Italian river divides into three sections. In this way, its strength is losttogether with the water flow rate.
The economy will also weaken due to the exponential surge of the infected and those who have to self-isolate? The risk is there. But it is also possible to avoid it.
The risk is there because the new variant spreads much faster than what we have experienced in the various waves so far. Let's expect the contagion curve to rise everywhere and reach levels equal to or higher than the true ones of a year and a half ago, which were a multiple of those that our poor testing skills allowed us to count at the time. Consequently, hospital admissions and deaths will also rise. Despite the fact that the most fragile people have been defended with vaccination (unfortunately many are no longer here).
Their immunization causes that mortality remains low. However, people over the age of 12 who have received at least one dose of vaccine are around 60% in Italy and in the other large EU countries, a little less in the USA (which are further along with the complete cycle) and almost 70% in the UK. The point is that the threshold of community immunity it has now risen to 90%, from 80%, precisely because of the greater contagiousness.
Therefore, they remain many people to be vaccinated, while the curve of the vaccinated tends to flatten, assuming an S shape, because it encounters resistance of various kinds to being injected with the antibody stimulant. Thus, even small percentages of mortality and hospitalization will give large numbers, being applied to large numbers.
How will people react? What about governments? Confidence, which also reached high peaks in Italy (at 2018 levels), will drop sharply again, while the afraid to leave the house, emptying restaurants, bars, holiday resorts, means of transport?
Or there will be one rush to get vaccinated? And the production chains Will they encounter new obstacles as borders are closed in order to avoid importing the virus? Or because the army of infected people and those who have come into contact with them is expanding, so that there is a lack of manpower, as British entrepreneurs are already denouncing? In the end, governments Will they be forced to back down and reintroduce restrictions on social activities? China, Taiwan, Russia, Israel and Spain have already done this.
The probability of all this happening is high. Because, once again, we underestimated the danger. And just waiting for it to occur might have repercussions on the stock markets, who would pay for the return to a normal life and profits. Giving another shot at trust itself. Although, as we explain in another article, it would not be a victory of the bear over the bull, stock exchange speaking, but only a correction.
However, we can avert the threat. Like? French way, that is, by allying the selfish impulses to free social life, a sacrosanct right (especially among young people, who will not live a second youth), with the social duty to get vaccinated. Paris has place people faced with the choice to get vaccinated or not to be able to go to the places appointed to bring together groups, more or less numerous, of individuals. It's not an obligation, even if it looks a lot like it; and cousins across the Alps have flooded their health system with requests for vaccinations.
In Ohio, however, they experimented a lottery linked to the vaccination code. An idea that could have great success in Italy, where various forms of games, more or less derived from Lotto, are all the rage.
Vaccinating is, as Jerome Powell, leader of the FED, has repeatedly repeated, the most powerful tool of expansionary policy. Both in the short and long term, because it prevents the virus from continuing to circulate and mutate, ending up piercing the defenses erected with vaccines. Thank goodness, summer is our ally, with the heat reducing the survival of the virus and life conducted more outdoors than in polluted rooms: let's take advantage of it to prepare for winter!
In addition to the possibility of increasing vaccinations, precluded in early summer 2020, on the plate of optimism regarding the economic prospects there are three other weighty reasons.
First, the awareness that pharmacology has made progress amazing in finding preventive cures and therapies against the virus. Other more effective and easy to administer preparations will come; one day, perhaps, orally, as happened in our childhood with Sabin's anti-polio, on a sugar cube. There Star Wars continue and in the end it will be won.
Second, the robustness of the recovery, i.e. the return to pre-pandemic activity levels, as evidenced by the coincident and anticipatory indicators.
Third, economic policies are and will remain super-expansive, as much as needed. The Italian Minister of the Economy has repeatedly reiterated this, Daniel Franco. The G-7 and the G-20 have underlined this. And central banks have become super-pragmatic and adaptable, definitively throwing the autopilot theorized by Milton Friedman, which therefore even received the Nobel Prize (confirming that economics is anything but an exact science).
About the economic signals, last month's data confirmed that Italy is leading the patrol of the advanced countries in the recovery, as in 2020 it had led it in the recession. A very helped rebound, here as elsewhere, come on fiscal policy support measures, which has now added the PNRR and will combine the measures contained in the budget law in the autumn. Thus, there will also be support for domestic demand in the next few years; and growth potential.
Il Italian PMI of services is joining unanimously with that of manufacturing, which is at its peak, in revealing the power of the recovery. Who benefits from the expansive impulses from the rest of the world, where PMIs are also high in the West, while the Far East suffers from vaccination shortages (repetita juvant).
But it is above all theindustry to run again, with the orders which promise new production gains in the coming months as well, provided that various shortages do not hinder it (chips, raw materials, labour: companies have much easier lai than words of satisfaction).
On the other hand, it's easy to say restart. We need to reorganize recover people who had quit or who, in any case, given the bad turn, had gone elsewhere. And then we would like well-trained personnel, so that the tank is large young without employment it remains full.
In some sectors, however, the full capacity, and this will stimulate other investments, which, as you said Mario Draghi, when he was still Governor of the Bank of Italy (revealing his genuinely Keynesian soul, having received the imprinting from Federico Caffè), present demand and future supply are; with multiplicative and accelerating effects on consumption and investments themselves.
That consumption are taking the baton from investments (which had restarted first) as can also be seen from the return of retail sales to the levels of the end of 2019. Household spending is once again fueled by what the British once called "earned income" , to distinguish them from public transfers, thanks to the improvement of the labor market. With the unemployment which, in the new ISTAT version (which includes redundant workers for over three months who have not carried out any search for a new job in the period of the statistical survey), drops even more rapidly. By reinforcing trust and reducing the precautionary savings, with a relative increase in the multiplier.
At the end of the Delta, the Po flows into the Adriatic, a calmer sea from other parts of the Mediterranean. The same will happen, with vaccinations, to the Italian economy. Which, however, it must equip yourself to navigate without too much trouble in stormy oceans of globalization and technological change. But that's another story, with a much more complex plot and where monsters to fight they are much more fearsome and hard to eradicate even than the epidemic.
