One paper that influenced market thinking in the early days of the COVID-19 pandemic looked at the effect of non-pharmaceutical interventions like social distancing and school closures during the Spanish flu (link here). The paper found that the US cities that implemented these measures tended to have better economic outcomes over the medium term. This offered historical support to the argument that there wasn’t such a big trade-off between economic activity and public health, because you needed to suppress the virus to enable consumers to be more confident and for businesses to operate as normal.
In today's chart we look at deaths from COVID-19 by age compared to and pneumonia and influenza in 1918 (thanks to Deutsche Bank).
However, a major difference between Spanish flu and COVID-19 is the age distribution of fatalities. For COVID-19, the elderly have been overwhelmingly the worst hit. For the Spanish flu of 1918, the young working-age population were severely affected too. In fact, the death rate from pneumonia and influenza that year among 25-34 year olds in the United States was more than 50% higher than that for 65-74 year olds. A remarkable difference to COVID-19.
This therefore begs the question of how history will judge the lock-down response to COVID-19, given its much more limited impact on workers in the economy. DB believe it's the number of cases, rather than deaths, that impact economic activity, which suggests that maybe governments were right to try to suppress the virus as far as possible. So we have an interesting situation at the moment, where rapidly rising cases in the US are slowing re-openings (negative) but the death rate is falling (positive). This may eventually give us more faith that we are now better at living with the virus.
(Source: Deutsche Bank)
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