The pace of economic growth in 2021 will largely be determined by the pace of distribution of Covid-19 vaccine. In the U.S., the total number of infections during the pandemic now exceeds 20 million, with 350 thousand deaths. Worldwide those totals are 85 million cases and 1.9 million deaths. Several countries remain in various stages of social restriction amid a resurgence in the virus driven by movement around the holidays.

The speed at which safe and effective vaccines have been developed has been nothing short of miraculous, a triumph of science and a tribute in part to the public-private cooperation of Operation Warp Speed. The first of those vaccines, from Pfizer-BioNTech, was approved for emergency use in the U.S. by the FDA on December 11. The Moderna vaccine was subsequently approved on December 18. Encouraged by evidence of success during their clinical trial phases, both vaccines were being manufactured prior to their ultimate approvals. In September, Pfizer indicated it was targeting to manufacture 100 million doses globally by year-end. In November, it lowered that projection to 50 million due to supply constraints of raw materials. At the same time, however, the company reiterated its objective of delivering 1.3 billion doses by the end of 2021. The U.S. government initially contracted to buy 100 million doses, and just prior to Christmas contracted to purchase 100 million more, with an option to purchase an additional 400 million. In mid-December, the government doubled its initial order of 100 million doses of vaccine from Moderna, with an option to purchase 300 million more. In addition, the government is working with four other companies to develop and manufacture vaccines. 

Vaccine Development has been Miraculous; Distribution has Fallen Short 

But while the vaccine development phase of Operation Warp Speed has been an unequivocal success, the distribution phase has so far been less successful. On December 9, the Department of Health and Human Services said there would be enough available doses to vaccinate 20 million Americans by year-end, 50 million by the end of January, 100 million by the end of the first quarter, and enough for anyone who wants it by the end of the second quarter. But the reality has so far fallen short. A January 2 analysis by Bloomberg estimates that just 13.1 million doses have so far been distributed in the U.S., of which only 4.3 million have been administered, representing just 1.3 percent of the population. Worldwide, an estimated 12.3 million doses have been administered, or less than two-tenths of one percent of the global population. Estimates suggest that herd immunity might require as much as 70-80 percent of the population to be inoculated. 

In fairness, it would be a mistake to extrapolate the experience of the first several weeks of the rollout to what might be expected over the months ahead. The process should become more efficient over time as logistical constraints, such as staffing shortages around the holidays, different rules among states, and even among counties, are overcome. And the recently enacted economic stimulus package includes $8 billion for vaccine distribution.

Can the Stimulus Package Bridge Americans to a Recovery? Much Depends on the Pace of Vaccine Distribution  

But even if Pfizer and Moderna can deliver their combined 400 million contracted doses by mid-summer, more help may be needed. Both vaccines require two doses, enough for 200 million Americans, or 60 percent of the population. A mid-December survey by the Kaiser Family Foundation indicates that 71 percent of Americans are willing to get the vaccine, up from 63 percent in September. Operation Warp Speed is also working with Johnson & Johnson and AstraZeneca, whose one-shot vaccine has already been approved elsewhere, with expectations that emergency approval of those vaccines could come sometime in the first quarter. Novavax and Sanofi are also at work on vaccines. 

Overall, the stimulus package should help the U.S. economy to continue growing in the first quarter of 2021, but at a rather sluggish pace, owing to the constraints of the virus. However, as the virus is eventually contained, growth is expected to accelerate. The satisfaction of pent-up demand could eventually result in a surge of activity. But any delay in the rollout of the vaccine could be costly, pushing out the timeline for the long-awaited return to normal.

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Sources: Factset, Bloomberg. FactSet and Bloomberg are independent investment research companies that compile and provide financial data and analytics to firms and investment professionals such as Ameriprise Financial and its analysts. They are not affiliated with Ameriprise Financial, Inc.

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