How is Omicron affecting the global economic recovery?

LATE NOVEMBER almost began to feel like the early days of the pandemic all over again. Global stockmarkets fell as news of what would come to be known as the Omicron variant filtered out and investors feared either another round of restrictions, or that people would shut themselves away. Two months on, Omicron’s impact is slowly coming into focus. So far it is, largely, better than feared. Markets are skittish, but because of the prospect of higher interest rates, rather than covid-19. Goldman Sachs, a bank, has constructed a share-price index of European firms, such as airlines and hotels, that thrive when people are able and willing to be in public spaces. The index, a proxy for anxiety about the virus, has surged relative to wider stockmarkets in recent weeks.

High-frequency economic data back up the cautious optimism. Nicolas Woloszko of the OECD, a rich-country think-tank, produces a weekly GDP index for 46 middle- and high-income economies, using data from Google-search activity on everything from housing and jobs to economic uncertainty. Adapting his index, which has been a good predictor of the official numbers, we estimate that GDP across these countries is about 2.5% below its pre-pandemic trend (see chart 1). That is a little worse than in November, when GDP was 1.6% below trend, but better than a year ago, when output was nearly 5% below it.