The Economist - USA (2022-01-29)

TheEconomistJanuary29th 2022 Finance&economics 63

have so far not come to pass. The great un­
certainty with Omicron relates to whether
the  bad  (greater  transmissibility)  out­
weighs  the  good  (lower  virulence),  and
thus whether there is a damaging surge in
hospitalisations and deaths from covid­19.
So  far,  though,  few  governments  apart
from  China’s,  which  is  still  wedded  to  its
zero­covid  strategy,  seem  to  believe  that
additional  drastic  restrictions  on  people’s
movements are required. 
A  quantitative  measure  produced  by
ubs, a bank, ranks global restrictions from
zero to ten and finds that the average global
score  has  risen  from  3  to  3.5  in  recent
weeks. Only one rich country, the Nether­
lands,  moved  into  a  proper  lockdown
(though this was relaxed on January 26th).
ubsalso  finds  that  the  share  of  interna­
tional travel routes with covid­related en­
try restrictions, at 31% globally, has barely
budged since October.
More  people  also  seem  happy  to  take
risks.  Goldman  Sachs  produces  an  “effec­
tive” lockdown index, which takes into ac­
count  not  only  governments’  diktats  but
also people’s choices. So far its global index
has  tightened  to  about  the  same  level  as
during the Delta wave of last summer, de­
spite four to five times as many daily infec­
tions.  Even  in  places  where  the  rapid
spread  of  covid­19  is  a  novelty,  people  are
largely carrying on as normal. Cases in San
Francisco were in the low double digits for
most of the autumn. Although the city now
averages about 2,000 a day, gyms and res­
taurants remain busy. Our global “normal­
cy index”, which looks at how people’s be­
haviour  has  changed  relative  to  pre­covid
norms, dropped in recent weeks, but now
seems to be recovering. 
Today’s  case  numbers  suggest  that
about  5­10%  of  Americans  currently  have
covid­19. Such high prevalence has created
a new difficulty that did not exist with pre­
vious  variants:  a  widespread  absence  of
workers. According to a survey conducted
at  the  turn  of  the  year  by  the  Census  Bu­
reau, 8.8m Americans were out of work ei­
ther because they were caring for someone

withcovid­19orbecausetheyhadthedis­

easethemselves.Attheendof2021, 138 Na­

tionalBasketballAssociationplayerswere

unabletoworkforcovid­relatedreasons,

thoughthisnumberhassincedropped.In

SanFranciscoa smallbutgrowingnumber

ofshops,whichhadalreadybeenstrug­

glingwithalabourshortage,areclosing

earlyforlackofstaff.

Measuringtheeffectofsuchabsences

onoutputishard,butitlookslikelytobe

limited—andshort­lived.Fora start,sever­

alfactorsmightoffsettheirimpact.Some

oftheworkerswhoareisolatingwillbe

abletotoilfromhome.Ifa restaurantis

closed,prospectivedinersmaystillhave

otherplacestovisit.Andfora timeatleast,

co­workerswhoareuninfectedcantakeup

someoftheslack.Theoveralldragcould

thereforebemodest.Researchpublished

earlierthismonthbyJPMorganChase,an­

otherbank,forinstance,speculatedthat

absencescouldreduceBritain’sgdpinJan­

uaryby0.4%.

Moreover, withcase numbers falling

bothinBritainandinsomecitiesinAmer­

ica,Omicron’seconomiceffectslooklikely

to faderapidly.Forward­looking surveys

alsosuggestthatfirmsarenottooworried.

Thereislittlesign,forinstance,ofade­

clineinbusinessconfidence(seechart2).

Despite a better overall performance

thanexpected,theglobaleconomicrecov­

eryfromthelockdownsof 2020 isstillun­

even.Thegapbetweenthebestandworst

performersisaswideasit haseverbeen.As

South Africa’s Omicron wave has col­

lapsed,gdphasrisenandisnowinline

withitspre­crisistrend.Britain’seconomy

seemstoberecoveringfairlyquickly.

Otherplacesarestillstruggling,how­

ever,whetherbecauseofa slowroll­outof

boosters, low population immunity or

plain badluck.Accordingto theoecd’s

measure, the Spanish economy is still

roughly7%smallerrelativetoitspre­covid

trend.Omicronhasnotdonetoomuchto

knock theglobaleconomic recovery off

course.Butsomeplacesstillfeela longway

fromnormal.n

A minor infection

Weekly GDP, % change from pre-pandemic trend

Selected middle- and high-income countries*

Sources: Nicolas Woloszko, OECD;

World Bank; The Economist *4 economies

1

5

0

-5

-10

-15

-20

2020 21 22

Invariant

Business-confidence index

Selected economies, 2008-21 average=100

Source:OECD

2

106

104

100

98

94

102

96

2019 20 21

United States

Britain

Germany

France

OECD

Germanbanking

Rescue mission

W

hen in april2018 Christian Sewing

took over as chief executive of Deut­

sche Bank few thought he would last very

long. The bank, one of Europe’s biggest by

assets, had been through four chief execu­

tives in six years, and its very survival was

at stake. It was unable to make enough pro­

fits to generate anything resembling a de­

cent return for investors, and seemed to be

frequently  ensnared  in  costly  litigation.

There was talk of the bank being taken ov­

er, and even wound down. 

Mr  Sewing  is,  impressively,  still  in  his

job—and  his  contract  was  extended  last

year, to 2026. On January 27th he presented

the bank’s annual results for 2021 at Deut­

sche’s  headquarters  in  Frankfurt.  They

seemed to confirm that the lender has sta­

bilised at last. Mr Sewing reported a pre­tax

profit  of  €3.4bn  ($3.8bn)  and  a  net  profit

of  €2.5bn  for  2021.  In  the  final  three

months  of  the  year  it  made  a  net  profit  of

€315m,  a  year­on­year  increase  of  67%,

beating analysts’ expectations. Across 2021

as a whole “we delivered our best result in

ten  years”,  said  Mr  Sewing.  Shareholders

seem  to  agree.  Since  its  record  low  in

March 2020, Deutsche’s share price has al­

most doubled. 

Has Deutsche turned the corner? A year

after  he  took  over  Mr  Sewing  announced

his  grand  plan  for  saving  the  152­year­old

bank that once financed Germany’s indus­

trialisation.  It  would  be  “the  most  funda­

mental transformation” of the bank in de­

cades, he promised in July 2019. He said he

B ERLIN

Has Deutsche Bank turned the corner?