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.

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.


A Lasting Change Caused by the Pandemic: A Shift to E-Commerce

While the US economy has seen a number of changes due to the pandemic, one particularly stands out: the increasing use of e-commerce to purchase items that would have been normally bought in stores. US consumers have adopted the practice with gusto, as groceries, garments, and numerous other products being ordered with increasing regularity.

A recent article highlights some of the effects of shift to e-commerce on the US economy as a whole, such as:

  • strong demand for corrugated boxes, padded envelopes, and plastic films to help protect shipped goods
  • additional facilities to not only produce packaging materials but also to serve as the warehouses that store packages prior to their final delivery
  • delivery vehicles – and more importantly, drivers – to transport packagers to their purchasers

Indeed, the increasing role e-commerce is playing in the US market is encouraging many companies to play larger roles in the development of warehouses. For example, Nucor – a leading US steel products manufacturer – announced plans to purchase Hannibal Industries, a manufacturer of metal racking systems and related equipment for warehouses. The acquisition provides Nucor with an opportunity to expand into this market segment; furthermore, given Nucor’s extensive network of steel production and fabrication facilities, the company will be able to increase production of racking systems as more warehouses are completed – thus providing sales growth.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Packaging and Construction areas, as well as topics such as Global Material Handling. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Covid-19      Industry Studies    

Companies Adjusting as Consumer Behavior Begins to Return to Pre-Pandemic Norms

While the coronavirus – particularly the delta variant – remains a threat to the US economy, many consumers are guardedly optimistic about the future. Indeed, for those who have been fully vaccinated, there is much more freedom of activity, and the prospect of dining out, shopping, and doing other activities without wearing a mask has encouraged people to return to the modes of behavior they exhibited before the pandemic. Indeed, these changes are taking hold in the economy in surprising ways.

One change is that as people re-embrace in-store shopping, they are relying less on online purchasing. Thus, UPS reported that in the second quarter of 2021, it shipped fewer packages than the year before. While package shipping volumes are expected to remain high going forward, it is anticipated that as consumers continue to return to stores, shipments of packages will continue to recede. This, in turn, will affect demand for such packaging materials as:

  • corrugated boxes and sleeves
  • plastic films and bubble wrap
  • tapes and other materials used to secure packages

Similarly, as concerns about the virus lessen, demand for cleaning products will also be affected. Indeed, the manufacturer of Lysol reported a decline in quarterly sales as consumers were less likely to religiously disinfect surfaces – a practice that became commonplace in the early stages of the COVD-19 pandemic when transmission vectors were less certain. Much as with UPS, while demand for these products is expected to remain high, sales are expected to recede from their elevated levels as consumers become less concerned about surface disinfection practices.

One thing that is NOT expected to recede going forward: the prices consumers pay for these and other products. Manufacturers of a wide range of items – food and drink, consumer products – expect prices to continue to rise throughout the rest of the year. While rising demand is playing a part in these rising prices, many of these price hikes are due to such factors as:

  • rising costs of raw materials
  • higher transportation and shipping costs
  • higher prices and shortages of packaging materials

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Packaging area, as well as analysis from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Packaging    

Outdoor Living & IPOs – Grill Suppliers & Retailers Are the Current Hot Thing

We’ve long been talking about the boom in backyard sanctuaries and entertainment spaces during this pandemic era, from pools and playground equipment to gardens and tools to furniture, grills, and fire pits.

July saw two key suppliers of grills and grill accessories (Weber and Traeger) and a leading online retailer of grilling equipment and other outdoor products (BBQGuys) announce plans to file for initial public offerings. This merged the trend of pandemic-era outdoor living with the strong stock market that has seen a large number of IPOs over the past year as companies emerged to capitalize on the growth. Many of these IPOs are using the special-purpose acquisition company (SPAC) form that BBQGuys is using; it is seen as a more flexible option with less restrictive reporting requirements.

Grill companies have benefited not only from the general outdoor living and entertaining trend, but also from the work-from-home trend. As more people worked from home, they tended to grill more meals at home – not just dinner on the weekends, but also lunch and even breakfast. Others who had previously not had the time to use slower outdoor cooking methods, like smoking, found that that changed as they could now start a meal earlier in the day while they were working at home and have it ready for dinner.

The group of people who have found their working situation has changed is still sizable. In The Freedonia Group’s National Online Consumer Survey conducted in June 2021, 10% of respondents noted that their change in working from home was temporary and has reverted to pre-pandemic patterns, but

  • 33% of respondents noted that they were still working from home full-time more because of the pandemic
  • 24% were working from home part-time more because of the pandemic
  • 24% were working from home occasionally more because of the pandemic

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Consumer Goods area with titles such as Outdoor Living 2021, Outdoor Kitchens, Outdoor Furniture & Grills, Landscaping Products, Power Lawn & Garden Equipment, and Outdoor Lighting. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods    

Overall June Retail Trends: Price Increases + Continued Opening = Additional Growth

The most recent retail sales report for June 2021 showed overall growth in retail activity, boosted in part by two key trends – price increases and continued opening of the economy. Ongoing concerns about plateauing vaccination trends and the spread of the Delta variant put some moderating pressure on trends.

Overall, retailers that saw the best gains had stocks and services that were linked to the away-from-home experience or simply benefited from the change of seasons and the warmer summer weather. Specifically, food service establishments and apparel retailers saw the best gains.

Some categories – including auto sales -- slumped amid ongoing supply chain challenges. Additionally, categories associated with home – such as furniture, sporting goods, and building materials retailers – slowed from May levels.

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.

  Consumer Goods      Covid-19