How is the fast-spreading Delta variant affecting the outlook for reopening and economic growth? Goldman Sachs Research’s Terence Flynn and Daan Struyven break down the implications for vaccines, booster shots and the economy on Exchanges at Goldman Sachs.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Is this exchange? Isn't Goldman Sachs an eye, Nathan. I seen your strategist Goldman Sachs Research in this episode. We're going to discuss the delta variant and how the spreading virus is affecting the path of reopening and economic growth. More broadly. To do that, I'm sitting down with my colleagues in research, Terence Flynn and our healthcare group, and then driven from our economic steep will first turn deterrents Flynn. Who covers the? U S, farmers sector and yes, we search for his thoughts on the delta variant and vaccines turns walk under the programme thanks so much else in really appreciate it. Right, so the delta variant seems to be driving yet another wave of krona virus keys is obviously the news is dominated by the spread of it. So just a start, why is a delta variant so worrisome sure so as most people noble
now the virus changes over time, and no there been a number of these different variance that have arisen over the course of a pandemic dealt is obviously the latest one and the thing about Delta is its more transmissible sort base. We have the ability to spread much more rapidly and so, for example, when a person's infected with Delta, they can in fact a greater number of people, then a person who was infected with one of their earlier strains of the virus, and for this reason it's why become the predominant strain around the globe. This also means that you could become infected during a shorter period exposed. and so that really relates to the fact that Delta leads to higher levels of virus and people. So, as a result, even if you come and count with someone who has a delta variant and you're not vaccinated, you could become infected over. You know a very short period of exposure verses, some of the prior strains of the virus, where it might take longer for you to become infected. So there are two other reasons: the third one,
is essentially relates to something that relate to the vaccination self, even if your vaccinated people are able to spread the delta variant and that's a little bit different from before what some of the earlier strains of the virus where, if you were vaccinated, it was very unlikely that you would be able to spread the infection vs asymptomatic infection. So you have some differences here with Delta and that's why there is such a big focus on it now and me another reason why it spreading so rapidly, so what we need- about how well the current vaccines hold up against the delta variant year directly gray question
topical, I mean were fortunate to have vaccines now, at this point, the pandemic, and so I'd say just to level set to remind people here about. You know some of the differences when we talk about Protection Maremma there, these asymptomatic infection infection, so those are essentially, you have virus virus in your body, but you don't show any outward symptoms. You can't really even tell that you have an infection. Then there are symptomatic infections. So essentially that's what's referred to as nineteen nineteen or the disease that the virus causes. Those are feverish symptoms. You feel bad for a few days and then there's severe and nineteen disease. Essentially the disease that could to pass pollination and poor outcome so essentially at the spectrum, and so I'll talk a lot about you know the efficacy first about symptomatic infections and I will go on to severe disease, but I think now we do
have a lot of real world data that are emerging from a number of different countries. Bottom line is the vaccine. Protection is still very robust after double vaccinations up, you ve gotten to vaccinations year in pretty good shape in terms of protection against Delta, but if you only had a thing vaccination. That protection levels are much lower. So, for example, there was a study, done in the UK, where they looked at, the five are bound to back seen, showed eighty eight per cent protection of symptomatic over nineteen doktor, second dose against the delta variant. Now, if we look back to you know the earlier, I am pointing a pandemic when we had the alpha variant. Thou is spreading. Efficacy of this vaccine was just over ninety percent. Ninety three percent, so not a big change there in terms of efficacy, but if you look at single dose vaccination, the efficacy against health has only about thirty percent
so a big step down there so again very important for people to be double vaccinated to get that protection against delta. Now there is some more recent data that emerged out of Israel, and this shows that bear even after double vaccination, efficacy against symptomatic cove. It has pulled back to about forty percent so that, in contrast to that, you know, eighty percent plus figure I cited previously on the UK. Now one of the questions is maybe this has to do with the time frame vaccination. As many people know, Israel was at the leading edge of the global vaccination campaign, and so there could be some of our waning effective the vaccines over time, and so that's one thing that and the companies are studying or gathering more data on to fully understand that now, as we shift to look at severe, does
remember, as I mentioned before. This is a spectrum right. So again. Here importantly, I think the message is the vaccine. Efficacy against severe disease and hospital innovation is still around ninety percent, even with the delta variant, and that comes from some data out of both Israel and Canada. So that's very encouraging and self bottom line is if your double vaccinated have very good protection against Delta especially against severe disease and hospitalization and that obviously, a big focus of the health care system, because when we talked about these lockdown indifferent measures that countries are taking, it relates to really trying to preserve that health care system capacity, and so, given that axing efficacy were seen here out of Israel in Canada, very encouraging protection against severe disease limits is thought to that because we see we have Pfizer. We Montana we have other vaccines around the world. Are there any very much he'll differences between these vaccines, so
the bottom line. It looks like the messenger, Nay vaccine, so Pfizer by on TAT in Madeira are somewhat better than the added no viral vaccines. Those from asked resent again Jane Jane for symptomatic covert. Nineteen so again that kind of symptomatic disease, but all for these vaccines looked to be very, very good. Severe disease in hospital patients are not as much of a difference there and remember that the big focus of the health care system is ensuring that were protected against severe, does even hospitalization self less differentiation among the vaccines on that front. We're here not the severity of illness for breakthrough infections, so meaning vaccine be bought getting them. Actions is actually Lauer. Is that true, What is the evidence say around that had obviously another very important topic here in everyone's pricing a lot of different headlines on their itself, but in a vaccine, breakthroughs are still gender.
we rare, but unfortunately they do happen now. The flip side of it is, if you do have a breakthrough infection this sometimes in duration of illness is likely much less severe than it would be. If you aren't vaccinated and there's some data that merged on this front from earlier in the pandemic. That suggest, if you do have a breakthrough infection you still have about. Sixty percent lower, flew like symptoms, then on vaccinated people and about to fewer days spent and bad verses. Someone who's on vaccinated, so bottom line is still very rare to see breakthrough infections, but if you do have a break their infection, the symptoms are much less severe and again I want to stress
You know these vaccines do a very good job against protecting against severe disease and hospitalization, and there's some recent CDC data out on this front. That's been collected in the U S through the end of July, so basically more than one hundred sixty million people on the. U S had been fully vaccinated now. During that same time, the CDC has been collecting data on hospitalizations and breakthrough infections, and essentially, over that time, about sixty six hundred people have had a breakthrough infection that lead to hospitalization or death. So sixty six hundred out of one hundred sixty million people So, very, very rare to see these severe breakthrough in action so bottom line. Is the vaccines work very, very well breakthrough. Infection can happen, unfortunately, but the vaccines do a great job of protecting against the most Here outcomes were also hearing a lot about booster shots, so you should individuals be getting another dose of the vaccine heading. The fall and winter. So what's that
based on that. Yeah are a very important question. Evolving topic here that we are following very closely sides. They just started a high level. There's too and why boosters might be needed? The first waiving immunity, and so that's what now we're talking about a little bit before with respect to some of the data emerging out of Israel, as if people got vaccinated earlier on in the pandemic, their immune system might not have as robust response as we go out further in time. This second reading Why you might be a booster is if there is an new variant that comes up that circumvents the protection that the vaccines provide? And if we look at seasonal flew at an analog. That's that
he's in why every flew season? We need a new flu vaccination, because the virus changes over the course of time. Every season there's a new strain of it that comes up as a result. We need a new vaccine to kind of counter that the strain of the virus rights of those at the primary two reasons why we need booster shots now. What we know right now is that for covered nineteen, it does look like boosters, have a role to play here in high risk population. So these would be people that I remain a compromise. So let's say someone had an organ transplant or they have an immune system disorder or their on amino. Suppressing drugs, like steroids or the elderly, the older population and now some countries are actually moving in this direction direction already, as people have already seen, Israel, Germany, I think even France, more recently recommending boosters for those higher risk populations, in the: U s the CDC is
reviewing the emerging data. That's coming out of the various companies in terms of the follow up data and they host these panels a set panels, probably once or twice a month, be their bodies spurts that review the data, and then they would make a recommendation. So, ultimately, I would expect by you know, maybe later this summer, early fall. We'd have some kind of update from the CDC regarding the outlook for whose in the? U S in terms What we model from a Pfizer perspective were assuming boosters in the elderly, are high risk population annual basis and then every other year and younger adults, but obviously you know looking forward to seeing additional clinical data here over the course of the rest of this year. The last point I would make is that Pfizer is planning to file an EU ay with after in August for a booster dose and then made file acts? U S as well kind of after that.
but just to clarify, when we see booster shots, are we talking about getting another shot, the same formulation or are companies actively providing new formulations with higher efficacy? To the new restricts soap known we think about it? There are two different types of booster shots, but the companies are working on. The first would be a third dose of the same vaccine. You got your first time around, and so that would be a third shot. You know six twelve months later, so that would be the first type of booster. This second would be a different form, malaysian of the vaccine that is Tallard specifically to address one of these new strains of the virus, so, for example, Durand and both have programmes. Looking at boosters against the beta variant, Pfizer's also talked more recently about starting a trial. Looking specifically at a delta booster vaccine, they don't think we'll need it, but again part of what the work the companies are doing. is laying the groundwork so that in the event,
There is a new variant that emerges that the vaccines that less advocacy against and we need one of these new strains- the company no from a regulatory perspective, what to do and how to navigate that pathway, to bring this to the market in as quickly and safely a manner as possible. So Lot of the work going on by these companies now relate these kind of next. Jan vaccines are really two way that regulatory groundwork so that in the event we need it, they'll be prepared, so ass, entered the next wave of infections. What do you see as the next stage of vaccine development first saw to that? Definitely, the boosters are and centre right now. I think you know a lot of efforts at the companies on that front and making sure that the global community is monitoring for different variants and so that, if there is one that does come up that you know, we have a more significant loss of efficacy against the companies can then develop that next Jan vaccine very rapidly. So that's definitely, I think one of the major efforts. The second one is obviously them.
The facts rain- I mean these companies, as you know, I'll, send have really then under tremendous pressure to ramp their manufacturing capacity to meet the global demand here and typically, these companies have a number of years. To do that, given the pandemic, they had twelve months to do this, and so there still in the process of increasing their production capacity. And so that's another big focus at the company's right now we're there. You know all hoping to be able to increase production into twenty twenty two, the their one, which is more of a longer term effort, is to come up with a combination vaccine. So essentially, if we do need more frequent boosters with a covert nineteen vaccine, there is the potential to combine that with a seasonal flu vaccine, and so that would be a so called Malta now in vaccine and so essentially, instead of getting you know, one shot for each. You could go into the doktor pharmacy. Any could get a single vaccination for all their so essentially combining from these vaccines into want to make it more convenient for people.
Thank you so much for breaking this all done for us, Terrance and, firstly, does sound like or entering or really have already entered a new chapter of this kind of areas that we really appreciate your insight thanks so much else in Rio Pritchett Invite were now speak to dance, driven, a senior economist in a global economic research group dead back into the programme, thousand for having Dan. We just Two Terence who provided a relatively reassuring picture about the extent to which vaccines are providing protection against the delta variant, but give us see update in terms of where things really stand, where I doubt very risks. Rising and there. They were sick. He also globally. The virus pictures pretty makes both in and yams in developed markets. The news is must positive in Europe, especially the UK delegation, fascinating case study to follow cases are down fifty percent since the big new hope
the commission's are starting to decline, and this happened after for reopening we also just got new July be data showing that the economy is re, accelerating following the beacon cases and for reopening. I expect that most of Europe will Did you get trajectory? Whither lag and you start, to see that cases are picking or started to decline in other european economies that were exposed. First stood out that most noted Spain, but also Portugal and an element. The rest of Europe seems to lag. Cases are still rising in France, ITALY and Germany old out. The gay cells are fairly low in Germany, so over I would say that Europe, you're, is positive, especially Newgate move into the? U S then uses somewhat negative. I would say on that, and you have very large differences across regions, although at the national level we now have fifty five thousand people in hospitals have shoots. Differences across states, depending on the vaccination for in Florida, why individual out of two thousand is now huh splice. Forget it
staggering number number is only one out of one hundred thousand in Vermont. Such huge differences across the burning primarily on vaccination bits you'll. We do. in that the increase in the spread of delta variant is going to weigh moderately on growth in the EU. S mostly because, of course, the risk aversion, primarily among the vaccinated individuals. In fact, we just got a gallop new pole, showing that the show of american states, feel protected, has dropped from fifty percent last month. Do not thirty eight percent. And, what's fascinating, is that the people who are really scared feel unprotected. We'll be vaccinated, meat, jewels and people. Feel safe. Ardor people. Don't plan to get vaccinated, citing ray The version is very important in the economic effects, not only about objective medical riskier, so you a huge discrepancy in terms of has position rates between certain state like Florida in Vermont? What does it look like in terms of vaccination rate discrepancies yesterday,
gaps are huge and the correlation between, on the one hand, vaccination race and, on the other hand, opposition race is very large and negative. The vaccination rates of the food but is not about, is around forty three percent, whereas in are these spaces. Like Vermont Massachusetts, more than that, percent of your adult population is vaccinated, and so we have these pretty large. Discrepancies and accordingly probably well with pulse pits I think there are some interesting dynamics here. The fact that you still have high virus transmission inferences Florida Alabama, I think its inner Ricky, also wing someone on. recovery in high vaccination states, because people also respond to the National NEWS, and we actually did, statistical were showing that the impact the national virus situation on your consumer behaviour is actually larger than impact. If you look of our situation, has at least that was the case last year before vaccination, so I do think that matters and is consistent with our slowing the consumption recovery. We have enough work.
Because I'm hearing bad news out of Florida on the structure, the virus sitting here in New York might be more hesitant to go to a restaurant, for example. Even though I'm fully vaccinate and rates are lower interesting you actually lowered Samir Fork. Space time the delta variant trajectory right and also what really did then factor into that? Yes, We have lowered or U S, growth, forecast model, pee, wee shaved off our consumption growth in the second half by two percent points analyzed primarily the back of a slower recovery, in the consumer services sector lingering virus fears continue, but also because the returned the office is going to be quite a bit slow Don't let me initially visions and so the office adjacent economy thing. The restaurants around the office, for instance, are still well below full utilization level. So primary reason for the grove downgrade is the slorc assumption recovery on the back of doubt that, but also bottle acts that are a bit more persistent, unexpected, including
in housing cells. Innovation in the devout MIKE around what about in the emerging markets about what are you saying there even more variation across the courts with a somewhat positive news, most of Latin America actually outside of mixing in most large that an american economies cases coming down. Vaccination is Latin America, ass? She, natural immunity rates are among the highest in the world and that's a very sharp contrast with Asia, Pacific region, very well in two thousand and twenty could bowling vires, true policy restrictions, but as results, naturally meteorites in Asia, Pacific a lower. They got started late with vaccination fritz any most Asia Pacific economies, the virus situations deteriorating, we sharply got or forget friends in India a few months ago, as you major in Japan Australia and other big focuses on China, where the number of cases has been rising pretty quickly at still fairly low levels, but we need much more transmissible strain. There's just a lot of
certainly, rather, zero covets is achievable even in China, which presumably is one of the most effective countries in the world to contain a virus it's a lot of uncertainty around China Growth in the third quarter. Here when you look at the emerging markets about is the lower vaccination peace, mostly the resultant supply. Or are you also seeing vaccine hesitancy taking hold in those areas, so Lastly supply, and if you can it is also distribution or constraints, and some of the asian economies primarily supply, what's actual workable. Is that demand vaccine and seems to be strong on average in emerging markets than envelop markets? If you look across the world, compare actual vaccination rates and the survey data countries Scorbutic high in terms of vaccine demands, are do you, Gay Spain, so Brazil and several other emerging markets and on the lowlands, you find certain states in: U S, friends, Japan,
Australia and Russia older recently, recital c pick ups in vaccine demand, primarily in the places where demand initially was not as result of one see changes as a result of outbreaks, they supported altogether for us Where was on global growth forecast. Let's say you are three months ago before I doubt that took the old, whereas now yes, have lords or growth forecast somewhat since dimension of doubt in April, but what's the most remarkable is that the gap between our goal we'll forecast for this year and consensus, has shrunk quite a bit from around the full percentage points, which is a lot to just three tat at this. Lines, is narrowing. The gap reflects both downwards to our own forecasting many economies, but also of great stood, a consensus which I think has been a little slower instead of adopting opposed to fuel, explanations. I know you ass his customers, the largest growth, rates have been in Asia. Pacific, especially ass The biggest standards references in the Philippines or Thailand's were not only suffering from high virus,
transmissions and restrictions, but also a very slow, a global terrorism recovery also, people downwards, in: U S on the back of data, but also on the back of bottlenecks in housing, in the labour market and in the good sector, or go for it so be very stable Europe, with its pretty bullish on Europe and actually last time or forecasts have increased at this point, the two biggest different, so between our global growth. Using a consensus is one report: collectively bullish instead of the only places where we really a lot above consensus, our place sport is a lot of room for faxing driven me opening, most notably Spain, certain Europe, but also in an seconds the second most will feature over global growth. Forecast is just the shortness of the? U S: growth, deceleration very essential turned from around seven percent growth this summer to a potential like ace of one and a half to two percent in the second half of next year? of slower reopening and fiscal embossed. It turns from sharply positive to negative back off,
here I am thinking about restaurant, but where's your mouth, but it does feel like the delta variant and maybe other variance still are the biggest threats to our growth outlook, even one that is now in bearing a sharp deceleration, in the U S reasonable, but other other draw so monitoring, so the biggest asset risk is the emergence of a new strain that would be more transmissible out, compete, Delta, but also the lower the ability of vaccines to prevent authorizations. hiding the delta risk is a quantifiable risk, because we know that you can still prevent aspirations which implies that in high vaccination economies, restriction should the limited, but a virus has made quite a lot, and we were not talking about alpha until December of last year. We started speaking Doubts on April and who knows, there's a lot of global virus regulations that, according to experts, is plausible risk. The utter big down The global growth is also related indirectly to the pandemic and out to rise. It ass a slow recovery,
of the global supply side of the economy, both in a good sector but also in the U S: labour market on the good sector or Some view is that even trees will be rebuilt in the coming months and that you should get a nice boost to growth from globally, country reformation, which has really weight on growth in the Eu S or German friends in the second quarter, figured if we talk about like all that supply shortages, we're talking about we're running out of a lot of things and you're the implications that ok, you're so decorative longer than its even the levels are ready now and if a lot of Asia, Pacific economies continue to struggle with lower vaccination rates and potentially also zero covert policies very hard to achieve. It could just take long for the global industrial sector to recover, see me or baseline view in the. U S on the labour market is quite bullish. We expect, in a blank rate, to fall from five point: nine percent to the low four percent this year on the back burner We ask the exploration of the general
federal unemployment benefit top ups, but also rising vaccination its it could take longer, perhaps tat there more complex reasons why people are not back at work. People are still potentially revisiting their priorities. Post dynamic between work, leisure, money, family health and so I think the slower. U S, labour market, a reason also something I worry about. I'm gonna learn a lot in the next few months and from that, ultimately, it's just there are people to services His trees had been lagging, and if there aren't, there could be it strange on growth, but only were expecting much of exactly. Thank you so much for the update Dan. Let's hope you dont have another beer. Coming our way, but we appreciate you being her thanks also version that concludes of exchanges, zone of exchanges for listening and if you enjoyed the. If we hope you subscribe, we apple you subscribe and Apple podcast, liberating and comment this podcast with accorded on August fourth and fifth, twenty twenty one
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Transcript generated on 2021-08-10.