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COVID restrictions: the data that explains why England is facing four more weeks of lockdown

COVID-19 cases and hospitalisations have risen over the past month, but more time to vaccinate people could stem the tide.

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Groups of six or more will be drinking and dining outside for another month as the final lifting of lockdown restrictions was delayed. cktravels.com/Shutterstock

UK prime minister Boris Johnson announced on June 14 that the fourth and final stage of England’s lockdown easing, due to take place on June 21, would be delayed by four weeks. Now scheduled for July 19, stage four will see the removal of all remaining legal restrictions, allowing groups of more than six (or two households) to meet socially indoors, nightclubs to reopen, and businesses such as pubs and hotels to return to operating at full capacity.

For now, though, people will have to wait. This will be frustrating for everyone, but when looking at the data, the logic of the government’s decision makes sense.

A key factor in decisions about restrictions in England has been the number of patients in hospital with COVID-19, as this affects the ability of the NHS to treat both patients with severe COVID-19 and also non-COVID patients. We also know that patients needing hospital care for COVID-19 generally develop severe symptoms around two weeks after infection. This means the impact of lockdown policies have an impact on numbers in hospital only after this lag.

From a peak in England of over 34,000 patients in hospital with COVID-19 on January 18, which was two weeks after the most recent national lockdown began, the number of patients in hospital had fallen to less than 800 by May 17, when the most recent round of lockdown easing took place (stage three).

This trend indicates both that the national lockdown was effective in reducing hospitalisations, as had been the case in the past, but also that the gradual unlocking in stages one and two (in March and April respectively) did not lead to a rise in hospital admissions. This is despite the increased interactions allowed in these first two stages.

Graph showing significant decline and then small increase in patient numbers.
Number of patients in hospital in England with confirmed COVID-19 in spring 2021. Peter Sivey and James Gaughan with data from coronavirus.data.gov.uk

At the same time, spring 2021 has also seen vaccines for COVID-19 being rolled out, beginning with the groups most at risk of requiring hospital treatment if infected. The latest data indicates that two weeks after a first dose of a vaccine, a person is 75% less likely to require hospital treatment for COVID-19 than an equivalent unvaccinated individual. Two weeks after a second dose, this reduction increases to around 94%.

Vaccine take-up has also been extremely high. On June 13, nearly 79% of adults in England had received a first vaccine dose and over 54% a second. The coverage of protection is greatest among the most vulnerable, with over 90% of the over-60s being fully vaccinated.

So far, so positive. But problematically, there has also been an upward trend in the number of cases and the number of patients in hospital with COVID-19 over the past month. To some extent this will be down to the increased interactions between people that have taken place since the last round of lifting on May 17.

However, the problem will also have been exacerbated by the more transmissible delta variant of the coronavirus, which is now dominant in the UK. The latest Public Health England analysis (released as a preprint, meaning it has yet to be formally reviewed by other scientists) suggests the delta variant is around 60% more transmissible than the previously dominant variant, alpha.

Vaccines break the link

A mitigating factor is that the vaccine programme has been effective in weakening the link between overall case numbers and hospitalisations. The graph below shows that the recent rise in cases is strongest among younger people, who are less likely to be fully vaccinated. New cases in the under-60s are nearly four times the level they were in early May. In contrast, the rise in cases in the over-60s is much smaller, a little less than twice what it was in early May, which mirrors the rise in hospitalisations, also up by a similar amount.

Graph showing under-60s cases rising much faster than over-60s cases or hospital admissions
The relative increase in weekly case rates for under-60s and over-60s in England since May 1 2021, alongside the seven-day average of new hospitalisations for COVID-19. Peter Sivey and James Gaughan with data from coronavirus.data.gov.uk

It therefore appears sensible to pause further relaxations of restrictions at this point to allow more vaccines to be given before moving to stage four. This should reduce and ideally overturn the current upward trend in hospitalisations.

By July 19, England is aiming to have offered all adults a first vaccination and everybody aged over 50 a second vaccination. This goal is likely to be exceeded given the current pace of the vaccine rollout: over 70% of over-50s have already had two doses.

People in their 40s, less than 50% fully vaccinated with both doses, is the main group with room for improvement. Although COVID-19 poses the greatest risk to the elderly, vaccinating younger groups like this should still have a good impact on reducing hospitalisations. Before the vaccine rollout got going, approximately 20% of patients admitted to intensive care with COVID-19 were under 50. Most were patients in their 40s.

A further four weeks also comes close to the beginning of school summer holidays, and so the extension is expected to reduce transmission without impacting further on education. While the final removal of restrictions may still lead to an increase in infections and hospitalisations, SPI-M – the government’s modelling group – has predicted that the peak of this wave would be reduced by between one-third and one-half by waiting four more weeks to relax restrictions.

While the announcement on Monday indicated July 17 would be the day of final and irreversible reopening, it may be most prudent to continue to follow the data rather than the dates. The key goal should be to maximise vaccinations in the adult population before this final step is taken.

Peter Sivey receives funding from the National Institute for Health Research (NIHR).

James Gaughan receives funding from the National Institute for Health Research (NIHR).

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There Goes The Fed’s Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

There Goes The Fed’s Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

Two years ago, we first said that it’s only a matter…

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There Goes The Fed's Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

Two years ago, we first said that it's only a matter of time before the Fed admits it is unable to rsolve the so-called "last mile" of inflation and that as a result, the old inflation target of 2% is no longer viable.

Then one year ago, we correctly said that while everyone was paying attention elsewhere, the inflation target had already been hiked to 2.8%... on the way to even more increases.

And while the Fed still pretends it can one day lower inflation to 2% even as it prepares to cut rates as soon as June, moments ago Goldman published a note from its economics team which had to balls to finally call a spade a spade, and concluded that - as party of the Fed's next big debate, i.e., rethinking the Neutral rate - both the neutral and terminal rate, a polite euphemism for the inflation target, are much higher than conventional wisdom believes, and that as a result Goldman is "penciling in a terminal rate of 3.25-3.5% this cycle, 100bp above the peak reached last cycle."

There is more in the full Goldman note, but below we excerpt the key fragments:

We argued last cycle that the long-run neutral rate was not as low as widely thought, perhaps closer to 3-3.5% in nominal terms than to 2-2.5%. We have also argued this cycle that the short-run neutral rate could be higher still because the fiscal deficit is much larger than usual—in fact, estimates of the elasticity of the neutral rate to the deficit suggest that the wider deficit might boost the short-term neutral rate by 1-1.5%. Fed economists have also offered another reason why the short-term neutral rate might be elevated, namely that broad financial conditions have not tightened commensurately with the rise in the funds rate, limiting transmission to the economy.

Over the coming year, Fed officials are likely to debate whether the neutral rate is still as low as they assumed last cycle and as the dot plot implies....

...Translation: raising the neutral rate estimate is also the first step to admitting that the traditional 2% inflation target is higher than previously expected. And once the Fed officially crosses that particular Rubicon, all bets are off.

... Their thinking is likely to be influenced by distant forward market rates, which have risen 1-2pp since the pre-pandemic years to about 4%; by model-based estimates of neutral, whose earlier real-time values have been revised up by roughly 0.5pp on average to about 3.5% nominal and whose latest values are little changed; and by their perception of how well the economy is performing at the current level of the funds rate.

The bank's conclusion:

We expect Fed officials to raise their estimates of neutral over time both by raising their long-run neutral rate dots somewhat and by concluding that short-run neutral is currently higher than long-run neutral. While we are fairly confident that Fed officials will not be comfortable leaving the funds rate above 5% indefinitely once inflation approaches 2% and that they will not go all the way back to 2.5% purely in the name of normalization, we are quite uncertain about where in between they will ultimately land.

Because the economy is not sensitive enough to small changes in the funds rate to make it glaringly obvious when neutral has been reached, the terminal or equilibrium rate where the FOMC decides to leave the funds rate is partly a matter of the true neutral rate and partly a matter of the perceived neutral rate. For now, we are penciling in a terminal rate of 3.25-3.5% this cycle, 100bps above the peak reached last cycle. This reflects both our view that neutral is higher than Fed officials think and our expectation that their thinking will evolve.

Not that this should come as a surprise: as a reminder, with the US now $35.5 trillion in debt and rising by $1 trillion every 100 days, we are fast approaching the Minsky Moment, which means the US has just a handful of options left: losing the reserve currency status, QEing the deficit and every new dollar in debt, or - the only viable alternative - inflating it all away. The only question we had before is when do "serious" economists make the same admission.

They now have.

And while we have discussed the staggering consequences of raising the inflation target by just 1% from 2% to 3% on everything from markets, to economic growth (instead of doubling every 35 years at 2% inflation target, prices would double every 23 years at 3%), and social cohesion, we will soon rerun the analysis again as the implications are profound. For now all you need to know is that with the US about to implicitly hit the overdrive of dollar devaluation, anything that is non-fiat will be much more preferable over fiat alternatives.

Much more in the full Goldman note available to pro subs in the usual place.

Tyler Durden Tue, 03/19/2024 - 15:45

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Household Net Interest Income Falls As Rates Spike

A Bloomberg article from this morning offered an excellent array of charts detailing the shifts in interest payment flows amid rising rates. The historical…

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A Bloomberg article from this morning offered an excellent array of charts detailing the shifts in interest payment flows amid rising rates. The historical anomaly was both surprising and contradicted our priors.

10 Key Points:

  1. Historical Anomaly: This is the first time in the last fifty years that a Federal Reserve rate hike cycle has led to a significant drop in household net interest income.
  2. Interest Expense Increase: Since the Fed began raising rates in March 2022, Americans’ annual interest expenses on debts like mortgages and credit cards have surged by nearly $420 billion.
  3. Interest Income Lag: The increase in interest income during the same period was only about $280 billion, resulting in a net decline in household interest income, a departure from past trends.
  4. Consumer Debt Influence: The recent rate hikes impacted household finances more because of a higher proportion of consumer credit, which adjusts more quickly to rate changes, increasing interest costs.
  5. Banks and Savers: Banks have been slow to pass on higher interest rates to depositors, and the prolonged period of low rates before 2022 may have discouraged savers from actively seeking better returns.
  6. Shift in Wealth: There’s been a shift from interest-bearing assets to stocks, with dividends surpassing interest payments as a source of unearned income during the pandemic.
  7. Distributional Discrepancy: Higher interest rates benefit wealthier individuals who own interest-earning assets, whereas lower-income earners face the brunt of increased debt servicing costs, exacerbating economic inequality.
  8. Job Market Impact: Typically, Fed rate hikes affect households through the job market, as businesses cut costs, potentially leading to layoffs or wage suppression, though this hasn’t occurred yet in the current cycle.
  9. Economic Impact: The distribution of interest income and debt servicing means that rate increases transfer money from those more likely to spend (and thus stimulate the economy) to those less likely to increase consumption, potentially dampening economic activity.
  10. No Immediate Relief: Expectations for the Fed to reduce rates have diminished, indicating that high-interest expenses for households may persist.

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TJ Maxx and Marshalls follow Costco and Target on upcoming closures

Many of these stores have information customers need to know.

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U.S. consumers have come to increasingly rely on the near ubiquity of convenience stores and big-box retailers. 

Many of us depend on these stores being open practically all day, every day, even during some of the biggest holidays. After all, Black Friday beckons retail stores to open just hours after a Thanksgiving Day dinner in hopes of attracting huge crowds of shoppers in search of early holiday sales. 

Related: Walmart announces more store closures for 2024

And it's largely true that before the covid pandemic most of our favorite stores were open all the time. Practically nothing — from inclement weather to bad news to holidays — could shut down a major operation like Walmart  (WMT)  or Target  (TGT)

Then the pandemic hit, and it turned everything we thought we knew about retail operations upside down. 

Everything from grocery stores to shopping malls shut down in an effort to contain potential spread. And when they finally reopened to the public, different stores took different precautionary measures. Some monitored how many shoppers were inside at once, while others implemented foot-traffic rules dictating where one could enter and exit an aisle. And almost every one of them mandated wearing masks at one point or another. 

Though these safety measures seem like a distant memory, one relic from the early 2020s remains firmly a part of our new American retail life. 

A woman in a face mask shopping in the HomeGoods kitchen aisle.

Jeff Greenberg/Getty Images

Store closures announced for spring 2024

Many retailers have learned to adapt after a volatile start to this third decade, and in many ways this requires serving customers better and treating employees better to retain a workforce. 

In some cases, the changes also reflect a change in shopping behavior, as more customers order online and leave more breathing room for brick-and-mortar operations. This also means more time for employees. 

Thanks to this, big retailers have recently changed how they operate, especially during holiday hours, with Walmart recently saying it would close during Thanksgiving to give employees more time to spend with loved ones.

"I am delighted to share that once again, we'll be closing our doors for Thanksgiving this year," Walmart U.S. CEO John Furner told associates in a video posted to Twitter in November. "Thanksgiving is such a special day during a very busy season. We want you to spend that day at home with family and loved ones." 

Other retailers have now followed suit, with Costco  (COST) , Aldi, and Target all saying they would close their doors for 24 hours on Easter Sunday, March 31. 

Now, the stores that operate under TJX Cos.  (TJX)  will also shut down during the holiday, including HomeGoods, TJ Maxx and Marshalls

Though it closed on Thanksgiving, Walmart says it will remain open for shoppers on Easter. 

Here's a list of stores that are closing for Easter 2024: 

  • Target
  • Costco
  • Aldi
  • TJ Maxx
  • Marshalls
  • HomeGoods
  • Publix
  • Macy's
  • Best Buy
  • Apple
  • ACE Hardware

Others are expected to remain open, including:

  • Walmart
  • Ikea
  • Petco
  • Home Depot

Most of the stores closing on Sunday will reopen for regular business hours on Monday. 

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