Are economies really returning to normal?

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Personal Investing

19 May 2020

People’s mobile phone data may hold the answer

Mobility data from *Google and *Apple can help us look through the rhetoric on the return to economic normality and see what is really happening on the ground.

On Sunday, Boris Johnson set out a ‘first sketch of a road map for reopening society’. Several other countries and some US states have already taken their first steps on this road towards restoring their economies to something like normality, but it will not be a straight path anywhere.

There are plenty of open questions. Will strict quarantine measures have to be re-imposed if there is a second wave of COVID-19? And even if people are permitted to revert to their pre-lockdown work and personal lives, how long will it take for them to feel comfortable enough to commute and socialise as they did before?

To help us begin to answer the second of those two questions, we monitor a number of different pieces of information. For example, Google and Apple both publish mobility data based on the requests they receive for travel directions through their popular apps. These services are admittedly used more for longer or one-off trips – we tend not to need directions for our way to work or the local shops – but they can provide some insight into how much people are venturing outside. The mobility trends are also in line with other data sources we track, such as restaurant bookings, cinema takings and labour-market activity.

Google’s data are more granular, separating travel to work from ‘retail and recreation’ movements. However, Google only releases its data with a one-week lag. Apple’s data, on the other hand, are daily but only split travel into driving, walking, and – for some countries – public transport.

We’re concentrating on Apple’s data for now given their timeliness. The data are available for individual regions and cities, so we can assess the impact on activity and virus trends at a granular level. They are also available for all major economies in the world except China.

Comparing Apples and economies

Looking at the data on people’s movements, we can then compare it with data on the economy. For this, we can use a deep dive into the impact on the French economy conducted in late March by the country’s National Institute of Statistics and Economic Studies.

This reported that the economy was operating 35% below normal levels at that time. This was a particularly bleak assessment based on alternative data sets such as credit-card usage and surveys of different sectors. We shouldn’t take it too literally, but it helps give us a guide to economic activity that we can compare with Apple’s mobility index. In France, this index was down 82% at the same time as general economic activity was 35% below normal.

Based on our analysis of this relationship between mobility and economic activity, and acknowledging the caveats already mentioned, the US is holding up better than elsewhere (from an economic perspective) and is gradually reopening.

GDP tracker using Apple mobility

Source: Apple, Legal & General calculations, 10 May 2020

We’ve also seen signs of economic improvement in Southern Europe as some restrictions have been lifted, although the trend in Spain has deteriorated recently.

GDP tracker using Apple mobility

Source: Apple, Legal & General calculations, 10 May 2020

Overall, this information about mobility trends on the ground is one more source of insight into the likely nature and duration of the current downturn. Along with the other data sources we monitor, this helps build a nuanced picture of the global economy and helps inform our views of the economy and the market.

*For illustrative purposes only.  Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.

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