COVID-19 Situation Looks Grim
COVID-19 seems to be getting worse in a few states in the west and the south. This isn’t a 2nd wave. It’s a continuation of the first wave. Deaths are unlikely to increase to the peak in early April because younger people are getting it and doctors have a better idea of how to treat it. That being said, it’s ignorant to act as if death is the only negative outcome. Going to the hospital due to a severe virus isn’t something to ignore especially if it overwhelms the healthcare system.
We will likely see targeted shutdowns in Houston, Phoenix, and Miami. Houston is now on pace to exceed its intensive care capacity by tomorrow (Thursday). On Tuesday, the government said it wouldn’t exceed capacity for 11 days. The situation is getting worse at an accelerating clip.
Texas had its largest increase in cases as there were over 5,000 new ones. A prediction that once the 7 day average got above 5,000, the stock market would take note, was basically correct. 3 days of 5,000+ new cases brought stocks lower. 7 day average is 4,556.
The chart above shows the latest data from Orange County. As you can see, there were 363 new hospitalizations which was a record high. The 7 day average of new hospitalizations was 247 which is also a record high. Narrative that the situation only looks bad because of increased testing could be wrong. People are increasingly being admitted to the hospital.
Openings in the states that didn’t originally get hit hard by the virus in April aren’t going well. This is a 2nd hump in the first wave. It’s entirely possible that there won’t be a 2nd wave, but we can’t look past this 2nd hump. The blue bars show the number of people in the intensive care unit. There were 145 which is 6 below the record.
Could The Economy Stall Out?
In Charlotte and Houston, Open Table reservations have fallen recently. It doesn’t matter if there aren’t shutdowns. People are going to stay home when the situation gets worse. Some commentators claim people won’t listen to the stay at home orders anymore. Personally, I strongly disagree.
In areas like Texas, Florida, Arizona, and California, people are going to stay home. Obviously, not everyone will, but you don’t even need a majority to limit their economic activity for the economy to be hit hard again.
The chart above shows the Open Table data in 4 states. Illinois has underperformed for the past couple months. I think that will reverse because it is doing a good job limiting COVID-19. On the other hand, growth in Florida and Texas will likely stop outperforming.
Georgia is a curious case because it was one of the first states to open, but it hasn’t seen an expanded outbreak. We can be sure scientists will be researching why that is. It could be because of faulty data or because it sufficiently dealt with the virus the first time.
Personally, I don’t think New York, Connecticut, Massachusetts, and New Jersey will have a massive spike in cases after their reopening. Their data looks like that of the countries which successfully stamped out the virus. Because they were severely impacted, they put forward the best protocols. Obviously, it would have been way better if they acted a few weeks sooner, but this is referring to the future.
Specifics Of Wednesday’s Record In Cases
Wednesday had the 2nd most new cases in America ever as there were 38,386. There were 808 new deaths as the downtrend is officially over. 7 day average stayed at 620. The next question is if it moves higher. We can expect it to go up modestly (maybe to 1,000).
There were 6,177 new cases in Texas and 5,511 new cases in Florida which were both records. Georgia had 1,703 new cases which makes 2 days in a row of much higher cases.
Mastercard Data Improves Again
Mastercard spending data is improving just like the Chase data except the Mastercard data is a bit better. As you can see from the table below, there was a 1% decline in switched volume in the week of June 21st. That’s up from an 8% decline in the week ending May 28th which was the last week of data in the last update.
United States had a 5% increase which was up from a 1% decline. Rest of the world had a 5% decline which was up from a 13% decline. Switched transactions were up 1% which was up from a 7% decline. Finally, cross border volume was down 41% instead of down 44%. Travel is still depressed.
Housing Still Looks Strong
FHFA house price index showed 0.2% monthly growth in April which missed estimates for 0.4% and was up from 0.1%. Yearly growth fell from 5.9% to 5.5%. Obviously, this data isn’t that useful because in April the economy was shut down. Investors are looking for very strong home price growth in May and June because there was a decline in supply and an increase in demand. Plus, rates hit a record low.
MBA index was strong again even though it fell slightly sequentially. Composite index fell 8.7% weekly after rising 8%. Purchase index was down 3% after rising 4% and the refinancing index was down 12% after rising 10%. The chart below shows the purchase index is still strong. Yearly growth was 18%. That’s 4 straight weeks with double digit growth.
COVID-19 is in full force in a few states. Texas is about to reach its breaking point which could mean lockdowns in select areas like Houston. The government doesn’t want to do a lockdown, but it might be forced to. If you’re going to do one, it’s better to do it early, but the Texas government still seems to be in the denial stage.
COVID-19 will hurt these states’ economies regardless of whether the economy officially shuts down. Mastercard showed strong volume growth improvement in the past 3 weeks. MBA purchase applications index fell weekly, but was up double digits yearly again.
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