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Omicron Already Hitting UK Economy: Pantheon Macroeconomics

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Covid-19 cases, hospitalisations and deaths are all falling in the UK, but the populace is in retreat fearing a new wave of the virus at some point in the future.

A significant domestic and global focus on the Omicron variant is the source of the anxieties with real-time data showing consumers are retreating from communal spaces such as gyms, pubs and restaurants.

Given the services sector accounts for the largest segment of the UK economy, this suggests a slowdown into year end.

"Real-time indicators suggest that the consumer services sector already has been knocked back since the news of the Omicron variant emerged last week," says Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics.

Open table diner numbers

Image courtesy of Pantheon Macroeconomics. 

Tombs says restaurant diner numbers last weekend were not as far above their level two years ago as they were the previous weekend, according to OpenTable.

And numbers were 4% lower on Monday this week than two years earlier.

Google Trends data meanwhile shows online searches that include the word "pub", "gym" and "restaurant" all have dipped since November 26.

Google trends data

Image courtesy of Pantheon Macroeconomics.

Data from Apple show the number of people in the UK requesting driving directions was 2% below its January 2020 level between November 27 and 29, whereas they were unchanged on their January 2020 level during the previous weekend.

"Public transport usage down slightly too," says Tombs.

Image courtesy of Pantheon Macroeconomics.

Consumer and business caution regarding the pandemic can prove to be a significant anchor on economic activity, as proven by the experience of July and August when growth ground to a halt despite all official restrictions being lifted.

The government lifted all restrictions in England in July but activity was hampered by high case rates and people being told to isolate.

Prime Minister Boris Johnson on Saturday said new measures to limit the spread of Covid would come in force from Tuesday, while UK-wide changes on international travel guidelines were announced last Thursday.

Thus far restrictions are limited to mask wearing and travel but the Prime Minister has not ruled out further measures.