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.

Seasonal Shipments Have a Tight Window of Peak Sales, But Goods Are Stuck in Transit

Seasonal businesses are feeling the crunch. While the warming weather and the hoped-for respite from COVID-19 outbreaks is spurring rising interest in a fresh wardrobe, outdoor recreation products, and gardening supplies and equipment, supply chains are not all able to keep up. Seasonal goods, particularly those being imported from Asia, are stuck in ports, waiting for an available container ship, waiting to be unloaded, or waiting for available trucks to get them to their final destination.

Suppliers of seasonal goods face a special challenge: a limited selling season during which goods are available for consumers when they want it. In most parts of the US, there is not a year-round demand for spring and summer clothes, gardening equipment, outdoor furniture, outdoor cooking equipment, pools and related supplies, and outdoor sports and recreation equipment.

Therefore, retailers and wholesalers must either store any products that are not sold during the peak window of sales or sell them in off-peak periods at what could be steeply discounted prices. The potential need to discount the price of products that do not arrive in time is particularly problematic as companies have often paid a premium (due to still sky-high shipping costs and inflationary pressures on materials and production in general) for these goods. Warehousing is also a challenge as warehouse space is costly for many and there is no guarantee that they will be able to sell the goods in the next season for the price necessary to cover the high costs associated with this current season.

Plus, as spring is seen by many as a period of awakening from our winter slumber, this is often the time of year that people are looking to refresh their homes, their wardrobes, their yards, their gardens, and their habits. As a result, many consumers are in the mood for something new, and styles warehoused from the previous season may not be attractive to consumers.

Therefore, suppliers and retailers are left with the challenge of ordering (how much and when) as well as with what to do when the goods don’t arrive when needed.

Many expect that supply channels will remain delayed for at least the next year or so. Shipping continues to be costly and will likely remain elevated, although not at the unprecedented levels experienced over the last few years. This, along with other inflationary pressures, makes season products a challenge as businesses and retailers ask themselves “how much is enough and will high prices deter customers in what has been a hot market?”

The threshold remains to be seen as consumer interest in outdoor living goods and a freshened wardrobe is still there. Freedonia analysts will continue to watch these trends for indications of directional change.

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

  Consumer Goods      Covid-19    

COVID-19…Forgotten (Almost), But Not Gone

This past week, COVID-19 outbreaks in Chinese industrial regions, Hong Kong, and elsewhere (including positive cases with the First Gentleman and former President Obama) pushed the pandemic back into the news, if not back onto the front pages where it had been for so long.

“Nonessential” business in several Chinese cities and movement between major industrial and financial areas such as Shenzhen, Shanghai, Tianjin, Qindoa, and Hong Kong have been restricted. Warehouses closed, and freight drivers face additional testing. Truck drivers must change at designated checkpoints around Hong Kong. These and other measures combine to challenge a global supply chain that was already seeing stresses from fighting in Ukraine and the corresponding sanctions on Russia.

However, China is seeking to institute more targeted coronavirus response actions to keep the economy from grinding to a halt when infections surface. The result has been that – following a week-long suspension of “nonessential” businesses – many are allowed to resume business if they meet specific criteria, including heightened testing and on-site dorms for workers. Still, those measures require resources and more rural and less economically developed areas are still subject to 2020-style lockdowns.

As responses change and outbreaks continue to come up (with the ongoing risk of new variants), there will continue to be hiccups in output and distribution. Companies will continue to watch for changes, particularly around key export producers, distribution hubs, and sea ports as well as shifting levels of openness in response to outbreaks.

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.

  Covid-19    

COVID-19: Back to the Office?

COVID-19 infection, hospitalization, and death updates no longer dominate the news. The wave of infections from the Omicron variant has ebbed.

CDC and state and local governments and health departments are loosening COVID restrictions, including requirements to wear a mask or to verify vaccine status when entering indoor spaces such as restaurants, offices, retail stores, and event spaces.

A growing number of companies are again announcing return dates in March and April, calling workers back at least one or two days per week.

So everyone is headed back to the office, right? Maybe…

But now we’re seeing gas prices rising dramatically, particularly as the Biden Administration today announced an import ban on Russian oil:

  • This could make commuting a lot more expensive, leading workers to push back on the return to offices as gas prices rise and transportation accounts for a larger share of household budgets.
  • There could be a social movement or other type of interest in making sure fuel resources are allocated for emergency vehicles, public mass transit, and for the transportation of needed goods throughout the country and locally.

Still, businesses that rely on workers returning to the offices are investing in innovations and new ways to market to these workers. For instance, Sweetgreen, a company that has traditionally had lunchtime and away-from-home workers as its target customers, is rapidly expanding its Outpost program again. The company is now up to 500 Outpost locations (spots in office buildings, hospitals, and other places where customers can pick up remote orders without going to a restaurant or incurring delivery costs), with 17 more opening this week.

Freedonia analysts will continue to watch corporate return-to-office plans and companies making moves to seize potential opportunities involving office workers, the flex workers, and the remote workers.

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    

Off-Premises Dining: The New Normal

Prior to the COVID-19 pandemic, the idea that a restaurant (save for the fast-food segment) would devote serious resources to expanding its operations in the take-out sector would be treated with derision. Why, after all, would a restaurant operator choose to sacrifice valuables in appetizers, beverages (particularly potent potables) and dessert? However, the COVID-19 has dramatically changed how the restaurant industry looks at carry-out: 

  • Many consumers are leery of eating in a restaurant (as of the June 2021 edition of the Freedonia Group National Online Consumer Survey, 52% of respondents still noted that they were eating less often indoors in restaurants because of the pandemic), but still desire their favorite dishes from local eateries.
  • A number of states and localities have loosened liquor laws, allowing the to-go sale of alcoholic beverages – thus reserving a source of revenue for many casual restaurants.
  • While dining apps (e.g., UberEats, DoorDash, and Grubhub) have become increasingly popular (as of the June 2021 edition of The Freedonia Group National Online Consumer Survey, 27% of respondents noted that they were ordering a meal from a restaurant via a 3rd party app more because of the pandemic), the fees they charge can add greatly to the cost of a meal.
  • Restaurants have expanded curbside delivery as a way to recapture market share (as of the June 2021 edition of The Freedonia Group National Online Consumer Survey, 34% of respondents noted that they were ordering carry-out from a restaurant more often because of the pandemic).

A number of restaurant chains have announced plans to expand curbside delivery options, refurbish restaurants to exclusively cater to drive-through customers, or launch new operations specializing in pickup and delivery. In most cases, this involved adding kitchen capacity dedicated to carry-out and delivery orders as kitchens were not equipped to handle off-premises orders along with a busy period of on-site dining. However, the space near the entrance meant for greeting and seating diners was not enough to also accommodate delivery and carry-out operations.

Thus, the recent news by TGI Friday’s that they would be developing a small format restaurant devoted to curbside and off-site delivery was of interest. Given the chain’s reputation as a leading casual sit-down restaurant, this entrance into the world of off-site dining can be interpreted to indicate that this will be a permanent change to US dining habits – even after the threat of the pandemic recedes.

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.

  Covid-19      Food & Beverage      Services    

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.