Mobility Restrictions – 42 geographies
The UBS economics team has been 'snapping' mobility restrictions for 42 geographies every week since early March. Initially, we had some rough guidelines (e.g. school closures were a minimum rating of '3' on our 1-10 scale; border closures a '5' and widespread quarantines/lockdowns a minimum '7' rating) but the sequence with which restrictions got lifted was different from the way they were imposed (e.g. border closures are likely here to stay for most countries, even as other restrictions get lifted) and so we've abandoned those constraints. Our tracker responds more quickly to changes than the Oxford Stringency Index and has mapped better to mobility data.
The level of restrictiveness is no longer declining
The simple average level of restrictiveness has declined from 7.5 (April 9) to 3.67 now, while the PPP-weighted average has gone from a peak of 6.7 to 3.46, but the number of 'severe' economies has fallen from 33 to 1 (Hong Kong and Chile switched places as being the last economy with a rating >7). This is the first week since early April that both the simple and weighted averages ticked up a notch, but essentially they've been flatlining since early July.
Subdued inflation, ongoing monetary policy support by the ECB
Our views on inflation and monetary policy are unchanged. Amid a wide output gap, subdued wage growth and modest energy prices, we expect subdued inflation over the coming 2-3 years; beyond this time horizon, the outlook is more uncertain, as opposing trends such as increasing automation, de-globalisation, or potentially greater market concentration might leave their mark. We expect the ECB to stay in ‘wait and see’ mode over the coming months, before raising and extending PEPP again in December.
7 countries have increased mobility restrictions the last 2 weeks
That has not happened since mid-April. Notwithstanding governments' attempts to be more targeted/local in how they respond to new outbreaks, national restrictiveness is creeping up and dispersion across countries is rising. The inter-quartile range is now a tick away from being back at the highs. That should widen economic dispersion in Q3.