Bond markets have been supported by some market-friendly data and while Fed speakers were again mixed, it was the more dovish remarks that captured attention.
AMW: Austria’s lockdown – should we worry?
Austria has re-imposed lockdown restrictions with a sharp rise in hospitalisations being driven by both the unvaccinated and older fully vaccinated people.
Analysis: Austria’s lockdown, should we worry?
- Austria has re-imposed lockdown restrictions with a sharp rise in hospitalisations amid a rise in virus cases. While it is tempting to attribute this to Austria’s lower vaccination rate, the Netherlands which has one of the higher vaccination rates at 73.5% has also imposed enhanced restrictions to ward off a rise in infections (note Australia is at 71%).
- Delving into the data reveals the rise in hospitalisations is being driven by both the unvaccinated, and older fully vaccinated people (70 years plus). Dutch health data shows in the two weeks between 1-14 November, of the people hospitalised with COVID, 51% were unvaccinated, while 47% were fully vaccinated on the first day of illness.
- The rise in infections for unvaccinated people is not overly problematic in terms of the rebound/global growth narrative in the sense that vaccine mandates could be used to lift vaccination rates. This is already starting to occur with Austria making vaccination compulsory from February 1. The rise in infections for fully vaccinated older people though is more problematic and is the subject of this week’s Weekly.
- To examine this issue we look at the experience of Israel, as well as the latest vaccine research from the UK and Netherlands. We find the most likely driver is waning vaccine efficacy over time, underlying the need for booster shots to be rolled out for older people, as well as to higher risk groups with a sharper decline in efficacy in evidence amongst those most vulnerable:
- Israel was one of the first countries to identify the decaying efficacy of the Pfizer/BioNTech vaccine and has since rolled out boosters. New virus cases and hospitalisations have subsequently declined. This suggests booster shots and a high vaccination rate are needed to prevent a renewed rise in hospitalisations.
- Subsequent research in the UK has backed these findings with notable differences in the effectiveness of the Pfizer/BioNTech vaccine after 20+ weeks. A peer reviewed study found that protection against hospitalisation due to the delta variant fell to 92.7% after 20+ weeks from 99.7% initially after two doses. For those aged 60 years+ the decay rate was similar at 90.7% after 20+ weeks, while for those aged 60 years+ and with pre-existing conditions it fell to 71.4%.
- Data in the Netherlands aligns with the decline in vaccine efficacy reported above. The decline in efficacy though has been more marked for those in the medical high‑risk groups who received the Moderna vaccine with efficacy falling sharply across all age groups to between 43-61% after 20-24 weeks. The decline in efficacy appears to trend with time, meaning as time passes, efficacy is likely to fall further.
- We conclude that countries will need to accelerate their booster rollouts. This could see a short-term re-tightening of restrictions over the next few months, but importantly should be only temporary and not derail the global recovery. Countries will have different tolerances with Europe more likely to tighten restrictions and the US less likely. China’s zero-COVID strategy will also likely persist until booster shots are rolled out.
Disclaimer: Your scribe is not a vaccine professional, but an economist being guided by findings of health professionals. This analysis is to provide guidance on how the economy may evolve.
Chart 1: Vaccine efficacy decays with time according to published medical research, backing the case for booster shots
Chart 2: Booster shots are starting with Israel and the UK leading
Chart 3: New virus cases on the rise in Europe