Economy News

Delta mutation lowers consumer and business confidence

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With the U.S. failing to contain the spread of the delta mutation of the new Covid-19, business and consumer confidence are rapidly declining.

Due to fading expectations of a rapid economic recovery, companies are revising their business plans and adjusting their profit forecasts.

The Financial Times (FT) reported on the 11th (local time) that the U.S. economic recovery is being overshadowed by the government’s failure to properly control the spread of the highly contagious delta mutation.

In a report by the Economic Innovation Group (EIG), one in four U.S. small and medium-sized businesses (SMBs) reported declines in sales in the last three weeks. During that period, only 8 percent of companies reported an increase in sales. According to an increasing number of responses, it will take more than six months for the economy to fully recover.

In spite of extensive vaccinations, the companies hardest hit by the pandemic are back on their knees due to the spread of delta mutations.

United Airlines has reduced its flight schedules for the four-day Thanksgiving holiday, Nov. 25-28, as well as Christmas in December. Delta Airlines and American Airlines lowered their earnings forecasts.

As a result of uncertainty, Home Depot, a U.S. provider of housing materials and services, did not provide an earnings forecast.

“We do not know how the delta shift will play out,” Miner said in a statement.

At the Barclays conference, Tracy Travis, chief financial officer of cosmetics company Estee Lauder, lowered his quarterly earnings forecast primarily because the delta shift has dimmed corporate travel bookings at MGM Resorts, which had been encouraged by corporate travel demand.

The spread of delta mutation also casts a shadow of uncertainty over companies’ schedules for returning to work.

Earlier this week, Microsoft (MS) announced it would postpone its return to work in the U.S., and Amazon and Apple expanded telecommuting as well.

Corporate earnings forecasts have been revised downward due to the delta change.

The number of companies included in the Standard & Poor’s 500 Index that lowered their earnings expectations rose from 37 in the second quarter to 47 in the third quarter, according to FactSet senior analyst John Butters.

Bank of America Securities’ interest rate strategist, Oleg Melentiev, said the U.S. economy is still on track for a solid recovery, but there’s a “significant reassessment” of its growth prospects.

“After a full return to normalcy over the summer, the outlook has changed from the expectation of a strong and sustainable recovery,” Melentiev said.

According to Morning Consult analyst Jesse Wheeler, consumer confidence has dropped “sharply” since the beginning of July, giving up all of this year’s gains and returning to February levels.

“I can say with confidence that the delta shift is a key factor,” Wheeler said.

In a Morning Consult survey last week, 43 percent of respondents said they felt uncomfortable returning to work.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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