We believe that a vaccine-driven reduction in hospitalizations is likely to kick offthe growth rebound through relaxed restrictions and some reductions involuntary consumer social distancing. We model the vaccine impact on hospitalizations in the US, where they appear to have peaked–consistent with the projections of our equity research colleagues a month ago–and in the UK, where they are flattening.
The health benefits from vaccinations should be front-loaded as the 20% highest vaccine priority citizens have accounted for roughly 50-60% of hospitalizations in both countries. So far, around 45% of long term care residents and staff in theUS and 50% of ages 80+ in England have already been vaccinated.
We construct hospitalization scenarios in three steps. First, we forecast vaccinations by demographic groups using our baseline vaccination timeline and tiering plans. Second, we estimate the historical contribution to hospitalizations from vaccinated groups. Third, we model intermediate, optimistic, and pessimistic scenarios for hospitalizations among those not vaccinated.
Our simulations deliver four results. First, we estimate that vaccinations so far have lowered US and UK hospitalizations by around 2% and 7%, respectively. Second, we estimate that through April, vaccinations should reduce hospitalizations by nearly one-half in the US and three-quarters in the UK relative to counterfactuals assuming no vaccinations. Third, hospitalizations have likely peaked in both the US and the UK. Fourth, hospitalizations are likely to remain above their early November levels for much of Q1.nRisks to our intermediate hospitalization scenario are mostly to the downside. While recent hospitalization trends are encouraging, slower vaccine distribution, lower demand among priority groups, the accelerated virus spread from new strains, and potentially reduced vaccine efficacy pose significant downside risks. Given the large uncertainty around our simulations, we will be watching regional and demographic data to detect early signs of vaccine-driven health improvements.
Taken together, this analysis supports our baseline view that vaccine-driven reductions in hospitalizations will help annualized Q2 GDP growth reach 10% in the US and 19% in the UK.
Merrill too:
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
