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The Economic Implications of COVID-19 in the US

News of President Trump’s infection highlights the increased health risks for the US and strengthens the hands of those arguing for a measured approach to economic re-openings. It is highly unlikely to mean a delayed US election, which would require consent of the Democrat controlled House. At the margin, Citi analysts think that the news may move Republicans toward a compromise on greater stimulus efforts.



Understanding the flu season and relation to COVID-19

  • Historically, the second year of a pandemic has been the most severe as the base population from which the epidemic grows is larger. The 1918 Spanish flu with its four discrete waves ran from 1918 through 1920. However, much has changed in terms of public awareness, medical treatment, and protocols implemented by governments since then.


  • Indeed, the global flu season has been so drastically altered by the steps taken to control COVID-19. In the US, the COVID-19 measures that were put in place in April and May appear to have brought an abrupt end of the 2019-2020 flu season. Research suggests a much lighter than typical flu season could see a pick-up in the US economy this year of nearly US$170B.


  • The benefit of a low flu season goes even further than saved lives and more dollars. It also frees up hospital resources to fight COVID-19. In the US alone, flu has been responsible for as many as 800,000 hospitalizations in a bad year (2017-2018). Even if the mild flu season only matches the best recent year in the US (2011-2012), that would prevent 650,000 hospitalizations, freeing medical capacity when it may be needed most.





More testing measures expected; May benefit certain healthcare companies

  • Beyond prudent individual steps like mask-wearing and social distancing, Citi analysts expect companies, schools, and governments to make increased use of this growing capacity for rapid testing in the coming months. While rapid tests may not be 100% accurate, when coupled with temperature checks and contact tracing, they could enable individuals to return to work and school, boosting productivity and sales for businesses


  • However, testing measures are an imperfect substitute to an effective vaccine, which is likely the only way to achieve durable herd immunity in the coming years. Citi analysts view the opportunities around testing as crucial for keeping economies in recovery mode, and this may also benefit a select few companies providing necessary medical equipment and lab diagnostics to meet increasing demand for those services.

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