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Covid Concerns Reignite: Week Ahead

Fashion firms and retailers are holding their collective breath for holiday as concerns mount that Covid cases could again spike up in the weeks ahead—following the same pattern as in 2020.

China is set to impose a seven-week port closure mandate as it doubles-down on its zero-Covid policy. Word surfaced late Thursday that scientists are now watching a fast-spreading  Covid variant—named Omicron—circulating in South Africa. The World Health Organization said it would take weeks to ascertain the effectiveness of vaccines against the new strain. Meanwhile, the European Union and the U.K. were quick to ban flights from the South African region last week, as did the U.S. India issued an advisory to screen foreign travelers, while Singapore is restricting entry from seven African countries. Japan has also tightened controls at its border.

China’s zero-tolerance policy saw it immediately implement its new mandatory isolation restriction for returning seafarers. The quarantine also barred crew changes, and there are no port operations during the seven-week period. The new mandate was first reported by Bloomberg.

Because Omicron is an emerging variant, not much is known about the strain. While it might be more transmissible, it is possible that it won’t have the severe consequences of other variants. The new variant has more than 30 spike protein mutations, versus an average of three on pre-existing variants. Morgan Stanley issued a CIO (Chief Investment Officer) Brief on Monday that said the number of mutations could mean the virus “may not be stable or ‘fit’ and die out.” The Brief also said it could take two weeks before there is some understanding about the mutations and vaccine efficacy.

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While substantially more people are now vaccinated than a year ago and many have also received their booster shots, there still cause for much concern. Even without the emergence of Omicron, the predominant Delta variant is still active around the globe. On Monday, Austria went into lockdown, despite the rollout of vaccines. That move made Austria the first in Western Europe to reinstate lockdown. On Wednesday, Italy imposed new restrictions for those who are unvaccinated. The country was the first to require proof of vaccinations or negative results from Covid tests for both public and private employees. Beginning Dec. 6 through mid-January, the unvaccinated will be barred from indoor dining and attending public events. Proof of vaccination will also be required for the use of public transportation.

Covid cases are on the rise again across parts of the U.S., as well. The upper Midwest and parts of the South are becoming the new hotspots. New England is also starting to report increases, particularly in Massachusetts and even Vermont, which has the highest vaccination rate in the country.

Consumers were already wary of shipping bottlenecks and shortages of goods on shelves due to backlogs at the ports. That prompted many to begin their holiday shopping earlier this year, according to the National Retail Federation, a retail industry trade organization. NRF is projecting holiday sales to grow between 8.5 percent to 10.5 percent, or between $843.4 billion and $859 billion.

A Goldman Sachs retail study found that 25 percent of consumers intend to wrap up their holiday shopping earlier than usual. Black Friday will complete the holiday shopping season for another 25 percent, with 55 percent planning to finish their shopping around the first week of December.

A report in the L.A Times on Nov. 22 suggested that deteriorating Covid conditions in Colorado possibly could be an early warning for California, mostly because both states have the same vaccination rate. Citing the Centers for Disease Control, Colorado’s vaccination rate is at 62.8 percent and California is at 62.7 percent.

A case spike in California could be another hit for the West Coast port system, which is just starting to see an easing of the backlog. One plus is that some deliveries have shifted to other ports around the U.S. In addition, many retailers have already resorted to air freight or even chartering their own vessels to ensure timely delivery of must-have items. But that also means the much hoped-for easing of container prices and shipping expenses might continue for some time into 2022.