The Delta variant of Covid-19, which has resulted in a sharp increase in coronavirus cases in countries all over the world, poses a significant threat to the pandemic’s recovery. And there are clear signs of damage in some places.
What’s going on: On Monday, IHS Markit released preliminary results from its closely watched purchasing manager surveys. The data revealed that the more contagious Delta strain is having a real impact in many advanced economies.
In Australia, private sector business activity fell for the second month in a row, with the rate of contraction increasing since July.
“Survey respondents signaled that the increase in Covid-19 cases, underpinned by the Delta variant, and the corresponding lockdowns across various Australian states in August continued to dampen demand and output,” IHS Markit said.
Japan’s business climate is also deteriorating, with companies reporting dwindling optimism in the wake of a recent spike in Covid-19 cases.
Part of the problem is ongoing supply chain issues, which are fueling fears ahead of the crucial holiday shopping season.
Coronavirus is a factor here, too; the most recent roadblock is in China, where a terminal at the Ningbo-Zhoushan Port has been closed since Aug. 11 due to a dock worker’s positive Covid-19 test. The schedules of major international shipping lines have been adjusted to avoid the port, and customers have been warned of delays.
“The pressures on global supply chains have not eased, and we do not expect them to any time soon,” Bob Biesterfeld, CEO of logistics firm C.H. Robinson, told my CNN Business colleague Hanna Ziady.
Although private sector output in the United Kingdom continues to grow, the recovery appears to be losing steam.
“Despite Covid-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers,” said Chris Williamson, chief business economist at IHS Markit.
Businesses cited staff shortages as a major stumbling block, in addition to supply chain concerns.
Supply chain woes are also affecting Europe, as evidenced by a slight drop in the Purchasing Managers’ Index.
However, according to IHS Markit, business output in the eurozone’s 19 countries “continued to grow at one of the strongest rates seen over the past two decades in August.”
However, according to IHS Markit, business output in the eurozone’s 19 countries “continued to grow at one of the strongest rates seen over the past two decades in August.”
“Although the spread of the Delta variant caused widespread problems across the region, curbing demand and causing further supply issues, firms benefited from virus containment measures easing to the lowest since the pandemic began,” Williamson said.
What’s on the horizon: Which camp will the US join? When IHS Markit’s data for the country is released later Monday, we’ll know.
According to CNN Business and Moody’s Analytics’ Back-to-Normal Index, the US economy is performing at 92 percent of its pre-pandemic level. However, due to Delta’s impact on spending, third-quarter economic growth expectations are softening.
