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.

Can-demic: Aluminum Cans Are Still in Short Supply

A trend we first noted last summer on this page (“A Shortage in Cans for Food & Beverages: Why? Will It Last? What Are the Alternatives?” August 26, 2020) is still a problem 6 months later. A number of factors have contributed to a recent and continuing squeeze on the supply of aluminum cans. Those related to the COVID-19 pandemic include:

  • a shift to at-home consumption of beverages –  this trend favors aluminum cans, as they are a format for single servings and beverages in canned forms are easy to stack in pantries when attempting to create a stock to limit shopping trips
  • restaurant uncertainty – restaurants have faced a number of changes to capacity and operations over the past year, and many switched to offering canned beverages because they are easier to save, such as during periods of closure and reduced occupancies

However, the reasons behind this trend are not all due to the COVID-19 pandemic. Other factors impacting shortages are:

  • Performance advantages – cans have better light and gas barrier properties, which makes them an ideal container for beer, seltzers, and other carbonated beverages.
  • A change in aesthetics preferences – beverage suppliers have long preferred glass bottles as a packaging option due to the perception that they are a higher-end option, but that is changing, particularly as consumers look for a format that is easier to take to parks and festivals, where glass is commonly banned
  • Sustainability – cans are mostly made out of old cans, and aluminum has a good reputation for recyclability – although the specifics can be a little more complicated than catchy sustainability slogans often lead one to believe.
  • The explosive growth in the popularity of hard seltzers – nonalcoholic seltzers are really cutting into the market share of traditional colas and fruit-flavored sodas, and these seltzers are almost always packaged in cans. Since those beverages are increasingly being consumed instead of beer or other beverages that often use other packaging formats, that’s putting additional pressure on aluminum supplies.

Solutions?

  • Can suppliers are ramping up production.
  • Some beverage companies are looking outside the US and beyond the typical supply chain for additional can supply options.
  • Some beverage suppliers are wrapping unused cans in the label of products they still need to ship.
  • Beverage suppliers are limiting production of some of the niche brands to have plenty of supply available for their flagship products.
  • Some beverage suppliers are witching to alternative packaging – for beverages that might mean plastic or glass bottles.

For more information about trends and opportunities, see The Freedonia Group’s coverage of the packaging industry as well as food and beverage research from sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Covid-19      Food & Beverage      Metals      Packaging    

Retail Sales of Building Materials Distributors Remain Strong to Start the New Year

Sales of building materials and garden equipment and supplies at retailers continued to exhibit strength in the beginning of 2021, rising at a seasonally adjusted pace of over 13% in January 2021. While sales in this segment were expected to remain robust through 2021, the scope of sales gains for the month was unexpected.

Increases in retail sales by building materials and garden equipment and supplies retailers were supported by such factors:

  • continuing interest in DIY improvement projects by those who remain largely home-bound due to the COVID-19 pandemic
  • positive weather conditions – such as mild temperatures and a lack of precipitation – in many parts of the US, which allowed contractors and crews to remain working on projects
  • the ongoing repair work in those parts of the US that saw severe damage caused by hurricanes and other storms in the late summer and autumn of 2020
  • high prices for lumber and other building materials

Regular readers of this blog are aware of the effect of these factors on not only building materials sales but also the construction market as a whole, as a wide range of projects have been affected by high material costs and shortages of materials needed to complete the construction of new homes or finish kitchen and bathroom renovations.

Freedonia experts will continue to monitor retail sales across multiple market segments to see how the US economy will fare throughout 2021. Major retailers such as Home Depot are considering what 2021 will look like, suggesting that if late-2020 levels continue, then 2021 sales (for comparable stores) could be flat to slightly positive the year from the high 2020 base.

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 also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Construction & Building Products      Consumer Goods      Covid-19    

COVID-19 Pandemic Continues to Affect US Housing Market

The US housing market has been a source of strength to the US economy during the COVID-19 pandemic. Demand for housing has remained strong as people – especially those fleeing urban areas hit hard by the coronavirus – continue to seek out homes in suburban and exurban areas. On the supply side, homebuilding continued at a healthy pace in most areas of the US, as most states and localities allowed construction work to progress.

However, for those in the industry who expected 2021 to be something of a smoother ride, the reality has been anything but, as the US housing market faces a number of challenges that can hamstring continuing growth.

First, home prices – which have remained high due to strong demand – are continuing to climb, threatening to price potential buyers out of properties. A shortage of existing homes available for sale as well as the rapid sale of a residence once it has been placed on the market, has pushed up the price of homes. This trend does not show any signs of abating soon, which would offer an opportunity to new home builders.

However, home builders are also facing crises. First, lumber and engineered wood product prices are also rising. Mills have been unable to meet the high demand for building materials, leading to shortages that have added thousands of dollars to new home prices, making them less affordable to buyers on the lower end of the market.

Furthermore, home builders must face shortages of building materials due to issues in the supply chain. Surging imports of a wide range of products have led to backlogs at the nation’s ports. Cargo ships take more time to be emptied, freight specialists have trouble finding space for off-loaded goods, and shortages of containers mean that products, even if available, cannot be transported to customers inland.  All of these factors add to the cost of building a new home and delay their completion – frustrating builders, contractors, and buyers alike.

Freedonia Group experts will continue to monitor lumber prices, housing availability, and the supply chain to determine their effect on not only the construction market, but other segments of the US economy. 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 also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Construction & Building Products      Consumer Goods      Covid-19    

Gojo Industries: Investing for the Future & Expecting Continued Elevated Demand for Purell

Several years ago, we helped with a CBS Sunday Morning story about Gojo Industries and its most famous product, Purell hand sanitizer. It was fun for us to participate in a story about an industry we’ve covered extensively and a local company making good. (Local enough that one of our analysts caddied for Gojo’s former CEO some 40 years ago, prior to the introduction of Purell.) At the time, Gojo’s main product was industrial hand cleaner, and the company was still trying to break into the consumer product segment.

But the COVID-19 pandemic really changed the equation for Purell. The pandemic changed hand sanitizer from a product most people used occasionally – when they handled something disgusting or were in the car or somewhere else where regular handwashing wasn’t possible. Now, hand sanitizer has become essential, not only in healthcare environments, but in offices, schools, stores, and pretty much everywhere else.

Increased demand led to a slew of new market entrants, including some temporary suppliers like distilleries and certain major consumer product suppliers. While it seems unlikely that demand for hand sanitizers will remain at the ultra-elevated COVID-19 level, Gojo is betting that the market’s new normal size is going to be a lot larger than it was when we got to talk about it on TV – they’ve done more hiring, increased R&D spending, and added warehouse space. And although most of us hope that our homemade masks became peculiar souvenirs pretty soon, the number of us with hand sanitizer on our desks, in our purses, in our cars, and some other handy (get it?) spot seems unlikely to decrease very much.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Global Industrial & Institutional Cleaning Chemicals, Global Industrial & Institutional Disinfectants & Sanitizers, Surface Disinfectant Wipes, Global Disposable Masks & Respirators, and Global Disposable Medical Gloves. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Chemicals      Consumer Goods      Covid-19    

Heightened Demand for Distilled Spirits Spurs Expansion of Barrel Stave Manufacturer

The announcement by a producer of barrel staves that it will expand its manufacturing facility demonstrates yet another way in which the COVID-19 pandemic has affected the US: in how we consume potent potables.

While alcohol sales at bars, restaurants, and other entertainment venues has dropped precipitously as the concept of a “night out” has become a distant memory for many at this time, retail sales of alcohol – such as at grocery, convenience, and liquor stores – has risen as US consumers have taken to imbibing at home. Furthermore, Americans are drinking more distilled spirits – bourbon and whiskey, gin, tequila – as well as the traditional beer and wine. Additionally, many consumers are opting for quality instead of quantity, opting for craft beers, fine wines, and premium distilled spirits.

While the reasons for this increase in consumption in distilled spirits are many – from stress relief to adventuresome home bartenders trying their hand at making classic cocktails – this increase in sales means that distillers will need more barrels to age their products prior to sale. And as federal regulations prohibit the re-use of barrels for Kentucky bourbon and other iconic whiskies, distillers must purchase new barrels every year. Hence, the need for more barrel staves.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including the Freedonia Focus coverage of Distilled Spirits: United States and our sister publisher Packaged Facts’ report on US Beverage Market Outlook 2020: Grocery Shopping & Personal Consumption in the Coronavirus Era. Freedonia Custom Research is also available for questions requiring tailored market intelligence

  Consumer Goods      Covid-19      Food & Beverage