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Investment analyst and trader Dwaine van Vuuren has examined the numbers to asses how the South African economy is emerging from Covid-19 containment. He has a refreshing way to assess economic activity and the spread of the Covid-19 virus, using unconventional indicators to figure out what’s really happening on the ground. Van Vuuren has put together a fascinating series of charts, which indicate for him that the virus is spreading faster than the economy is reviving. – Editor
By Dwaine van Vuuren*
How is the SA economy recovering from the Coronavirus lockdowns? Instead of using traditional economic indicators that have a month or more delay we can examine high frequency (weekly) data from the Google community mobility indices to try and figure out how the economy is recovering. These indices use Android smartphones and Google maps requests to anonymously track movement trends over time by geography, across different categories of places such as retail and recreation, groceries and pharmacies, parks, transit stations, workplaces, and residential.
During lockdown, residential movement went up and workplace movement went down. To adequately track traditional economic activity, we can subtract residential movement from workplace movement to derive an Economic Mobility Index (EMI) and represent this as a % of the pre-lockdown trend. This is shown below together with cumulative SA Covid-19 infections. It appears SA has recovered about 50% of her pre-lockdown economic mobility:
We can introduce a very useful two-dimensional effect to the Economic Mobility Index by using cumulative infections on the x-axis as opposed to traditional time:
This new way of looking at the data is designed to measure the pace of economic re-opening and recovery as well as provide early warning of a potential second wave of infections that could derail the recovery.
- Flatter slopes less than 45-degrees are less desirable outcomes and indicative of slow mobility recovery and/or increasing infection rates (infections rising faster than mobility).
- Steeper slopes of more than 45-degrees angle are better outcomes characterized by rapid mobility recovery and/or decreasing infection rates (mobility rising faster than infections)
Should a second wave of infections occur as the economy opens, the mobility curves will start to flatten and the dots representing the data will widen the spaces between each other.
We can see from the above chart that economic mobility came plummeting down, bottoming on 13 April when the initial hard lockdown was supposed to end. The two weeks of hard lockdown “extension” saw less compliance and mobility started creeping up as we approached the 1 May date when Level-4 lockdown measures kicked in. Economic related mobility then increased at a rapid rate in the ensuing 7 days and exactly 14 days after the lowest mobility reading, infections increased at a rapid pace, flattening the EMI substantially and widening the dots between points. Presumably the 7-14 day coronavirus incubation period was now kicking in due to the increased mobility of two weeks prior..
In the week leading up to Level-3 restrictions, mobility started picking up pace in anticipation of more relaxed regulations to be enacted on 1 June. However an interesting thing happened in the week following the relaxed regulations – mobility did not increase that much, in fact a lot less than it increased in the first week of Level-4, and infections increased pace again, flattening the EMI and widening the dots between points even more. The Youth Day public holiday saw economic mobility drop quite sharply and hardly recover thereafter.
How do things look at a provincial level? We can apply the same principle above as shown below:
These four provinces account for 90% of SA’s total infection, and it is quite clear that infections are increasing at a pace far higher than mobility. Also economic mobility in Western Cape and Gauteng was far harder hit than Eastern Cape and KwaZulu-Natal.
Whilst we appeared to get great bang for our buck going to Level-4, the economic benefits (measured by increased mobility) after the first week of Level-3 seem somewhat muted, rather than the big jump in mobility that was expected.
Regardless of which province benefited the most or least, all four results are bad, as infections are increasing at a much faster rate than economic mobility which has hardly improved at all in the last 3 weeks.
How is SA faring against the major 8 economies of the world that are coming out of lockdown?
The charts below show us that the US and Russia are struggling to grow their economies faster than infections whilst the other six major economies seem to be faring very well emerging from lockdowns (most above a 45-degree angle), with no major 2nd wave resurgences (just yet anyway!)
- Dwaine van Vuuren has a Bachelor of Science Honours degree majoring in mathematics, computer science and statistics and is a full-time trader, investor and quantitative analyst. His passion for numbers and keen research and analytic ability has helped grow RecessionALERT into a company used by hundreds of hedge funds, brokerage firms and financial advisers around the world.
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