How COVID could threaten consumer spending

Brian Sozzi, Myles Udland, and Julie Hyman discuss how the COVID Delta variant will affect consumer spending as reopening stalls due to a rise in COVID cases among the unvaccinated population.

Video Transcript

MYLES UDLAND: Welcome back to Yahoo Finance Live on this Monday morning. And for the second Monday in a row, we are talking a little bit more about the impact that COVID might have on the economy.

And, Sozzi, we continue to see, as we have discussed throughout today's program, more and more economics teams thinking about a potential downgrade to their GDP forecasts as the cycle matures and as the Delta variant continues to spread.

BRIAN SOZZI: Right, Myles. And we started-- we started the morning discussing how Goldman Sachs came in here slashing their GDP forecast for the third quarter, fourth quarter, and ultimately for the full year. It's almost as if Wall Street was awakened-- awakened last Monday when stocks really fell out of bed-- Dow down over 900 points-- to revisit their growth models. And that is what Bank of America is, in fact, doing.

But I will highlight this. First, they are noting that Google Mobility data, air passenger traffic, OpenTable reservations, gasoline demand, box office receipts-- generally speaking, that continues to trend OK. That has been up week over week. That is good, according to BofA economist Michelle Meyer. But they are starting to call out some potential leveling out, which you could, in fact, see on this chart. See, residential demand mobility, that is flattening out a little bit. Mobility to grocery and pharmacy, that is leveling out in recent weeks. And this is now starting to happen as the COVID-19 infection rate starts to increase and hospitalizations also start to increase.

Also interesting too, BofA noting they ran an internal survey saying the share of respondents who are not concerned about being in a public space is now at 41%. That was at 50% two weeks ago. So they're trying to make the point here that this stuff might start to show up in the hard data. We have not seen that yet, per se, but it could start to show up in retail sales data, other consumer spending data, and then ultimately perhaps some retail earnings outlooks when they report in the mid to end of August.

And you're seeing some Google Mobility data here. Again, starting to leveling out pretty much in the Northeast, Midwest, Southwest, and even the West, or, a.k.a., around the country.

And it is-- while it's not started to reflect in the hard data just yet here, guys, it is being reflected in cyclical stocks. Some of the worst-performing stocks over the past month have been a Hilton, have been a Marriott, have been a Choice Hotels, have been Delta, have been Southwest, despite those companies coming out last week-- you know, coming out with pretty good earnings and positive things to say about demand looking out into the back half of the year. So those stocks are really starting to underperform. I even look at Macy's, a frequent whipping boy on our show here. That stock is down about 15% over the past month. And the hotels again today starting to see-- or really continuing to see some mixed action.

JULIE HYMAN: Well, and what's interesting to me is, during the pandemic, we were all talking about the haves and the have-nots and how it sort of revealed these divisions within the economy, and, yet, these divisions are now persisting because of the vaccine. This is something Meg Fitzgerald was on our program last week talking a little bit about, this sort of now divide geographically that looks like it's going to be emerging because some people just refuse to get vaccinated, and those parts of the country economically look like they're going to lag.

MYLES UDLAND: Yeah, I mean, I think another part of this-- and if we go back to that first chart that we had up, which was the somewhat concerned verse very concerned verse not at all concerned spread among consumers, you mentioned that drop in the share of folks who were not at all concerned from around 50% back towards 40%. What we're discussing are changes on the margins of people's outlooks, right? We're talking about a half percent or even, in some cases, a full percent of GDP. It's not a-- it's not a huge change in the economic outlook. But the way that this recovery right now, where it stands, with this conversation around peak growth, those changes come-- those are slim differences between half of the country and 42% of the country saying they're not at all concerned about COVID. That is a handful of vacations, a handful of flights, a handful of dinner reservations, and, at this stage of the recovery, that's the stuff that really I think makes the difference in terms of where this data ends up coming in.

BRIAN SOZZI: Yeah. And it will be interesting to see the next wave of data for July. And I'm also starting to wonder, how does this play out in the next jobs report?

MYLES UDLAND: And we will see one week from this Friday.

BRIAN SOZZI: Yeah.

- That's right.

MYLES UDLAND: We'll be here.

BRIAN SOZZI: Yeah.

MYLES UDLAND: OK. Nine days. Still plenty of time. It's a late one, right? Because this Friday is the 30th.

BRIAN SOZZI: We're live at 8:25.

MYLES UDLAND: So, yeah, August 6, I think, 6th. As late as possible. Could be the 8th, would be the latest. Anyway, we'll leave that for another time.