How is Delta Affecting Consumer Behavior?

How is the recent increase in COVID-19 cases in the United States linked to the spread of the Delta variant affecting the U.S. consumer’s behavior? We look at some consumer confidence-focused high-frequency data for clues on how this uptick in COVID-19 cases appears to be moderating behavior rather than having the dramatic effects that lockdowns had on economic activity.

“The Delta variant has weakened consumer confidence which has, in turn, added extra caution to our outlook,” explained LPL Financial Chief Market Strategist Ryan Detrick. “But widespread lockdowns seem unlikely and we see inventory replenishment and pent-up consumer demand as key reasons to remain bullish on the US economic recovery.”

High-frequency data from the TSA shows that air traffic through U.S. airports recovered to about 80% of pre-pandemic 2019 levels, peaking around the end of July at just over 2 million passengers per day. Since then the number of passengers has dropped by about 14%, however the influence of the Delta variant looks tempered as around 11% of this decrease would have been expected in a pre-pandemic environment related to the end of summer and children going back to school.

Data on U.S restaurant diners from Opentable shows a similar recovery from the pandemic lows of -100% to eclipsing pre-pandemic levels at the end of June of this year. There has been a slight dip since that full recovery and reservations are now down 10% versus pre-pandemic levels. The national data masks wide discrepancies in the data between different states and cities such as Nevada and Las Vegas showing increases of 38%** vs 2019 bookings even as New York state has seen a 38% decline and San Francisco has fallen 56% for the same period.

U.S theatre box office sales show the appetite to go to the movies has waned slightly during the past few weeks, from a peak in mid-July and it is still extremely depressed compared to pre-pandemic levels. Even at the recent peak ticket sales are less than half of the average weekly level for 2019. There are a couple of unique factors that could be causing this data to recover more slowly than airline tickets and restaurant bookings. Demand for theatre tickets could have been permanently reduced by the substitute product of direct-to-consumer movie releases. There is also a supply issue, with studios not wanting to release their blockbuster movies in an environment where they could be playing to sparse crowds (due to any social distancing requirements or consumers choosing to moderate behavior and stay home).

As we continue to keep a close watch on how the Delta variant unfolds across the U.S, and its potential impacts on the economy and markets, we believe that there is a lack of appetite for renewed stringent lockdowns. More likely the Delta variant may have a smaller drag on the economy from the moderations in consumer behavior as shown in the high-frequency data. While other concerns like inflation and some recent data disappointments remain, we believe we’re still in the middle of a robust economic recovery with a solid outlook, which should provide a supportive backdrop for equities.

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