The Best Cure for Cabin Fever Is To Go Shopping in a Mask

I’m not a virologist or epidemiologist, but I do know that we all have cabin fever, which is best cured by leaving the cabin and trying to get back to some semblance of a normal life.

There are mounting signs that the global economy is recovering from the lockdown recession caused around the world by government leaders hoping to contain the Great Virus Crisis (GVC) by imposing severe stay-in-your-cabins restrictions to enforce social distancing. The lockdowns triggered depression-like freefalls in real GDP around the world with soaring unemployment. The spring economic re-openings are unleashing a tremendous amount of “cooped-up" demand to spend money on goods and services and to go back to work.

The demand is being fueled by a tremendous pile of cash/saving/liquidity that accumulated during the lockdowns. People who could continue to earn a paycheck working from home were stymied from spending much more than they could online and at grocery stores. Unemployed workers received government support payments but likewise were limited in their ability to go shopping. The central banks continue to pour liquidity into global financial markets. Fiscal policymakers have joined the stimulus party, resulting in the global implementation of Modern Monetary Theory, or MMT, i.e., massive fiscal deficits financed by massive quantitative easing.

Let’s review the latest signs of the global recovery: 

(1) On the road again. Gasoline usage continues to recover in the US. After plunging 43% from the week of March 13 through the week of April 24, gasoline demand has rebounded 43% since then through the week of June 12 (Fig. 1). It is up from a low of 5.3mbd during the April 24 week to 7.6mbd during mid-June. That’s an impressive recovery but has a ways to go to reach a more normal pre-GVC pace of around 9.5mbd. Yet it’s certainly on the road to getting there in coming months. Apple’s Mobility Trends Report shows that the change in routing request since January 13 is up 9% in the US. (It is up 28% in Germany and 49% in Italy over the same period.)

Where are Americans going? They are going out to shop to relieve their cabin fever. Retail sales jumped 17.7% during May following a 14.7% drop the month before (Fig. 2). Excluding nonstore retailers (which includes online vendors), retail sales rose 19.7% during May after falling 19.0% during April.

(2) Flash PMIs. On Tuesday, IHS Markit reported that its flash estimates for the US M-PMI rebounded from the lockdown low of 36.1 during April to 49.6 this month (Fig. 3). Even more impressive is the jump in the flash US NM-PMI from a low of 26.7 during April to 46.7 during June. Also impressive are the Eurozone’s flash M-PMIs and NM-PMIs: The former rose from 33.4 during April to 46.9 in June, while the latter soared from 12.0 during April to 47.3 this month.

(3) Three regional business surveys. June data are available for three of the five regional business surveys conducted by the Fed’s district banks. The general business indexes of all three rebounded smartly from their recent lockdown lows: Philadelphia (-56.6 during April to 27.5), Richmond (-53.0 to 0.0), and New York (-78.2 to -0.2), (Fig. 4). Their average index rose from -62.6 to 9.1, with the new orders composite up from -66.1 to 7.0 and the employment component up from -41.0 to -4.3.

(4) Commodity prices. Professor Copper, the commodity with a PhD in economics, has been confirming the rebound in the M-PMIs around the world. Its price bottomed at $2.12 per pound on March 23, and is up 25% since then through June 22 (Fig. 5). The red metal is one of the 13 components of the CRB raw industrials spot price index, and its recent price action suggests that the index has bottomed.

Not surprisingly, the price of copper is also highly correlated with the price of a barrel of Brent crude oil (Fig. 6). The latter recently bottomed at $19.33 on April 21. It was up 123% to $43.08 as of Monday’s close.

(5) The virus is still out there. Now for the bad news. Rapidly rising case counts of COVID-19 and mounting fatalities could cause state governors to impose a second wave of social-distancing restrictions. I doubt that they would lock down their state economies again, but the economic recovery could be weighed down by ongoing restrictions.

New daily cases in the US were going down throughout May into early June but ticked up when states re-opened. The US reported more than 30,000 new coronavirus cases on Friday and Saturday, the highest daily totals since May 1, according to data compiled by Johns Hopkins University. Apparently, too many people are returning to their normal activities without following social-distancing guidelines and without wearing face masks to curb the spread of the virus.

(6) The case for masks, again. Back in late March, I wrote that wearing masks in public would be a much better alternative to lockdowns to stop the viral pandemic: “We need an alternative to social distancing, which has been enforced by government decrees requiring us to stay home."

On April 3, the Centers for Disease Control (CDC) recommended the use of simple cloth face coverings to prevent transmission of the virus by both symptomatic and asymptomatic persons. Some state governors now require people to wear face coverings in public. But some think that mask-wearing laws infringe on our civil liberties, and compliance isn’t widespread, furthering the spread of the virus.  

“Wearing of face masks in public corresponds to the most effective means to prevent inter-human transmission, and this inexpensive practice, in conjunction with simultaneous social distancing, quarantine, and contact tracing, represents the most likely fighting opportunity to stop the COVID-19 pandemic,” wrote a team of researchers in Texas and California. In a June 11 study, the researchers compared COVID-19 infection rate trends in Italy and New York both before and after face masks were made mandatory. “They found infection rates in Italy and NYC only started to slow after face masks were made mandatory, not after the lockdown was put in place in Italy or after stay-at-home orders went into effect in New York,” reported CNN.

The Mayo Clinic noted that the CDC recommends cloth face coverings for the public in order to reserve more effective N95 respirators for frontline healthcare workers. No mask is completely preventative, but the risk of transmission decreases when combined with other contagion-mitigation strategies like social distancing and personal hygiene. “And countries that required face masks, testing, isolation and social distancing early in the pandemic seem to have had some success slowing the spread of the virus,” observes Mayo.  

“There are rules about not smoking in enclosed restaurants and bars because that smoke can be deleterious to someone else’s health,” said a professor of medicine quoted in a May 6 CNN article. “Now we’re in a situation where, if I’m infected with the COVID-19 virus, my breath can be lethal to someone else.”

Wearing masks is the most effective protection we have right now against the virus. It beats the alternative of staying home and getting another round of cabin fever.

Dr. Ed is one of LinkedIn's 2019 Top Voices in economy & finance. Institutional investors may sign-up for a complimentary trial of his research service at https://lnkd.in/eYNwch8. His book, "Predicting the Markets," is on Amazon. His new book, "Fed Watching for Fun & Profit," is available there at https://lnkd.in/eAh3urh .

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