US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Rising Lumber Prices; Again a Challenge to Construction Industry?

Over the past year and a half, the US building construction industry has been buffeted by a wide range of issues – COVID-19, shortages of labor and raw materials, and surging prices for materials when available. For many in the construction industry, high lumber prices were perhaps the most pressing issue. Given the ubiquity of lumber in construction jobs – from building decks to making structural framing – high lumber prices bedeviled builders, contractors, and consumers for most of the second half of 2020 and the first half of 2021 before prices returned to their pre-pandemic norms.

Now, however, lumber prices have started to rise again, causing angst among the construction industry. While prices – about $700 per thousand board feet – are far below the $1,700 peak seen last year, their rise – at a time when inflation is affecting so many other items (such as gasoline, fasteners, and other building components) – is a concern:

  • A prolonged surge in lumber prices may negatively affect home prices at a time when there is a shortage of affordable housing.
  • Consumers buffeted by rising prices for a wide range of consumer goods may cancel previously planned home improvement projects.
  • Contractors may sacrifice profitability to keep getting bids – a strategy that only works in the short term!

Some feel that this increase in lumber prices in a temporary blip – the onset of winter will bring a reduction in many construction jobs, allowing supplies to increase and prices to fall. Others, though, are concerned that this increase is a harbinger of another round of prices. Freedonia analysts will continue to monitor lumber prices and their effects on the construction industry as a whole.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Continuing Declines in Sales by Building Materials Distributors: A Time to Worry?

The recent release of the August 2021 retail sales report by the US Commerce Department showed that sales by building materials and garden equipment and suppliers posted declines yet again in August, falling more than 4.5% in that month. While still up more than 15% compared to retail sales in this market segment last year, this decline in sales has prompted concerns among some in the industry.

To be sure, many of the declines in sales have an explanation:

  • Steep drops in lumber prices – in many places in the US they are at or below their traditional price levels – meant that sales of this key building material would fall in value (if not unit) terms.
  • The end of summer means that many construction professionals – especially in the northern half of the US – will be working less due to shorter days and the heightened prospect of inclement weather.
  • Consumer spending was concentrated on back-to-school supplies, and not necessarily those related to outdoor living and leisure (an important sales channel for many retailers).
  • The end of summer also means that gardeners wrap up their activities for the year and homeowners and landscapers generally cut grass and perform other lawn maintenance activities less.

Going forward, industry professionals can expect sales in this market to continue to fall. Construction seasons will continue to shorten, and contractors will purchase less material. In the gardening and landscaping segment, many crews will curtail activities or shift to other types of work – landscapers will get trucks and equipment for winter plowing.

Sales in the segment will be supported:

  • consumers’ fondness for Halloween activities, such as decorating yards and buying pumpkins – many retailers stock product lines in this category
  • consumer interest in preparing for winter – buying snow blowers, shovels, rock salt, and other items

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Indoor Air Quality: The Next Infrastructure Shift?

If we designed a healthier waste, sewage, and water system to make cholera history…

If we installed window screens, used pesticides, and managed standing water to reduce insect-borne illnesses such as yellow fever, malaria, West Nile, Dengue, Zika, and others…

How did we manage to forget indoor air quality?

Was it because allergies were seen as seasonal or easily treated?

Was it because colds and flus were seen as something that didn’t remain in the air, but had more to do with spread by contaminated contact?

Or perhaps illnesses stemming from indoor air quality were seen as mostly just irritating for most people so something we lived with rather than addressed directly?

With the COVID-19 pandemic, the construction industry along with building owners might be finally taking indoor air quality – especially filtration and ventilation – seriously as a public health measure in buildings everywhere. The pandemic made more consumers aware of the difference that appropriate ventilation and filtration can make in the health of building occupants.

Increasingly, schools, offices, retail stores, and restaurants are using these improvements to market their location as safe and as a place people can feel more comfortable working in-person, lingering over dinner and drinks, browsing sales racks, or bringing their children indoors. Similarly, many also promote their cleaning processes or list the brand of disinfectant they use to communicate that this is a safe location.

LEED certified buildings more specifically consider filtration and ventilation. However, most buildings are set to minimum code requirements (which are typically based on standards developed by ASHRAE) and are most interested in heating and cooling capacity. Will this be the moment that turns high level IAQ issues into a priority for all buildings, including retrofitting existing buildings? Freedonia analysts continue to monitor changes in thinking – from building codes to costs to owner/occupant demand.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Global HVAC, Global Filters, Consumer Air Treatment Systems, and Indoor Air Quality Equipment: Air Treatment & Ventilation (coming soon). Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Hurricane Ida: Still a Disruptive Force to the US Economy

Hurricane Ida has finally passed into memory after making landfall in Louisiana and soaking much of the Eastern US with heavy rainfall. However, the effects of the storm are still being felt across the US in a number of ways:

  • Gas prices: For many in the US, high gas prices were one way in which the effect of Hurricane Ida was evident: a significant number of refineries are located in Louisiana, all of which ceased operations in the wake of the storm. Prices for regular gasoline climbed as supplies fell and people in the path of the storm purchased fuel for their vehicles before temporarily evacuating.
  • Diesel fuel prices: While few Americans fuel up with diesel, the trucks that carry consumer goods across the US almost exclusively rely on it. Thus, refinery shutdowns due to Ida meant that diesel fuel production was curtailed as well. This caused diesel prices to reach new highs – costs which will almost invariably be passed on to the consumer. Shoppers – who have seen high prices due to various pandemic-related supply chain issues – thus saw further price increases as shippers were forced to pay more to fill their trucks’ fuel tanks.
  • Plastic resin costs: In addition to gasoline and diesel fuel, refineries also make the feedstocks used to make the plastics that, in turn, permeate nearly every corner of our lives. Thus, refinery shutdowns also affected resin supplies, with two plastic types – polyvinyl chloride (PVC) and polystyrene (PS) – most affected. PVC is used in a wide range of building materials (e.g., siding, doors, windows, wire and cable jacketing, low-slope roofing membranes); both PVC and PS are frequently used in packaging applications. Shortages of these resins thus would not only affect the housing market – at a time of elevated housing prices – but also impact the price of thousands of consumer products, from groceries to health and beauty products.
  • Building materials: Building materials were already in short supply across the US due to a surging housing market and strong consumer interest in home improvement projects. Now, with thousands of homes and businesses across the nation damaged by Hurricane Ida, consumers are now facing a shortage of building materials as contractors scramble to perform needed repairs. Furthermore, even if materials are available, the workers needed to install them are also in short supply, further delaying repair and renovation projects.

Freedonia analysts will continue to monitor the ongoing effects of Hurricane Ida – as well as other severe weather events – on the US economy.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Declining Retail Sales Among Building Materials Distributors: A Time to Worry?

The recent release of the July retail sales report showed declines in retail sales for many segments of the economy, and the building materials and garden equipment and supplies segment was no different, posting a decline of almost 9.0% from the June retail sales report. While overall retail sales in the segment were still much higher than last year – a 16.4% increase over that of July 2020 – the steep fall in retail sales in the segment has people wondering if this portends a downturn in overall building construction activity.

However, it must be noted that there are a number of explanations for the decline, key among them:

  • the retreat in lumber prices from their record highs seen earlier in the year – a key share of sales for many building materials retailers and distributors
  • the elimination of many state-level unemployment benefits and stimulus packages – many consumers have less discretionary income and will be less likely to invest such items as home goods and lawn and garden consumables
  • shoppers’ concerns about contracting the Delta variant of the coronavirus – many consumers stayed home and ordered products online or opted to delay their purchases for the time being

Retail sales by building materials and garden equipment and suppliers are expected to remain at a much higher rate compared to last year, as the bullish housing market and high level of consumer interest in DIY projects will continue to propel sales of lumber and many other construction products. However, for the rest of the year, retail sales in the segment may continue to fall, as lumber prices continue to remain at more historically normal levels and the advent of winter weather will affect construction activity, especially in the northern half of the US.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.