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.

Post-COVID Plans: Weddings, Working Out, Traveling, and…

Did you put off some a life event because of the pandemic? You’re not alone. This year’s wedding season is forecast to be one of the busiest in recent years with the number of couples expected to marry rising 15% over recent norms.

Do you have a bad pandemic habit to break? You’re not alone there either. Despite our increased healthy habits like hiking and walking the new dog and trying plant-based foods, the “quarantine 17” (pounds, that is) and increased drinking habits were the flip side. Many of us are now looking for ways to break some of our less-than-healthy habits.

Are you sick of your own backyard? Well, despite the continued investment in home spaces, some people are. The cruise industry is looking at a rebound in bookings and booking sites such as Vrbo, Airbnb, KAYAK, and others are seeing strong demand for spring and summer travel despite high gas prices and rising airline ticket rates.

Key business opportunities in the coming months and next few years are going to center around things we missed out on or what will help us return to “normal” (whatever that is). This will include services as well as related products and equipment from save-the-date magnets and formal apparel to workout gear to luggage and more. The challenge will be for companies needing to have the staff and products to accommodate this shift in demand.

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      Custom Research    

The West Comes Together to Enact Harsher Economic Sanctions on Russia

After the initial measures taken by the West to prevent Russia’s invasion of Ukraine failed, the goal of new economic sanctions has moved from deterrence to punishment.

Western backlash to Russia’s invasion of Ukraine has been uniformly severe. Some significant new economic sanctions were implemented on February 24 by the US and the European Union, including:

Over the weekend, the severity of the sanctions was ratcheted up significantly.  Among the most impactful of the new measures were:

  • banning Russia from SWIFT system access: Russia has now been cut off (as Iran was in 2018) from access to the SWIFT financial messaging system that facilitates rapid and secure cross-border payments. While Russia has its own internal alternative to SWIFT, it is far less sophisticated, and thus an exclusion from SWIFT will impose massive costs on the country, particularly in the short term. Initial holdouts from Germany, Italy, and Hungary, which in part wished to keep SWIFT expulsion as a deterrence against further Russian transgressions (with some feeling that extensive business ties between banks in these countries and Russia also fueled reluctance), softened their stances over the weekend in order to support harsher sanctions.
  • US sanctions on Russia’s central bank: The Biden administration moved to prevent Americans from doing any business with the Russian central bank and to freeze its assets in the US, which, as of Monday morning, was helping to send Russian markets into meltdown  

These measures will substantially impact both the Russian and global economies.  Metal commodity prices will be especially impacted in the areas in which Russia is a major player, discussed in an earlier Freedonia Impact Tracker.  Additionally, industries that rely heavily on exports to Russia will be affected by a short-term free fall in Russian consumer purchasing power, as the value of the ruble had declined by about a quarter as of Monday morning relative to its Friday level.

Given the substantial escalation of sanctions on Russia, will its energy sector be next? Oil and gas account for 60% of Russia’s exports and 36% of its budget revenues, and restrictions on the import of these products in the West would be the clearest way to strike a devastating financial blow to Russia. However, it is unlikely to be targeted in the near term. A big reason for this is fear of driving oil and gas prices higher. Surging energy prices were a key concern for consumers before the invasion of Ukraine, and already, oil prices have jumped over $100 a barrel as many fear the conflict may lead to a supply disruption. Punishing Russia’s energy sector would push prices even higher, which would be unpopular to both to Western consumers and governments. Additionally, Europe – which currently relies on Russia for 40% of gas consumption – would not be able to entirely shift away from Russia and toward smaller supplier countries in the short term even if it wanted to.  However, other steps have been taken that may harm the Russian energy industry in the long-run, such as Germany mulling an extension of the lifespan of its nuclear power plants, which would reduce its dependence on Russian gas.

Freedonia analysts continue to watch changes in geopolitical positioning – including any additional sanctions that might accompany this crisis – as well as related effects on the supply of key industries and currency fluctuations.

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.

  Custom Research      Industry Studies    

Labor Challenges: Where Did the Workers Go?

Labor issues are a common theme among the news and among analysts around the virtual watercooler... but just where did these people go?

  • Some left for better paying jobs in other industries
  • Some left for better working conditions in other industries
  • Some retired
  • Some died as COVID-19 hit the US population hard
  • Some left the workforce to provide caregiving for family members, children and/or the elderly, especially with remote schooling, limited access to quality day care, concern about elder care living facilities in light of pandemic isolation and tight staffing, and an aging population
  • Some chose to work part-time
  • Some did not immigrate, as international movement slowed in the pandemic period

Many companies have been turning to automation and artificial intelligence to cover the gaps. However, public policy and workplace innovations will be needed to fill the gaps left by these changes in the workforce. To be clear, changes were needed as the retirement of the large baby boomer cohort was inevitable and pending, but pandemic era-related changes accelerated the need.

Freedonia analysts will continue to watch trends affecting the workforce, from labor participation, immigration, and retirement trends to automation, employee incentives, workplace flexibility, and other solutions.

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.

  Custom Research      Industry Studies    

Wood You Believe It? Lumber Prices on the Rise Yet Again

The cost of lumber in the US reached its peak in mid-2021, as a misreading by lumberyards and homebuilders of the impact of COVID-19 on consumer behavior led to a shortage of lumber and prices triple those seen in early 2020. The situation was exacerbated by COVID-related supply chain issues and tariffs on softwood lumber imports from Canada. This greatly increased the cost of new home construction (around $36,000 per home, according to the National Association of Home Builders) and home renovation projects, which became especially popular among the vast amount of households stuck at home during the pandemic.

Lumber costs finally fell in the summer of 2021, as DIY-inclined homeowners grew fed up with sky-high lumber costs and postponed their renovation projects. While lumber costs remained well above pre-pandemic levels, there was some sentiment that the market had stabilized enough to avoid further short-term price spikes.

Well, that lasted a few months. In 2022, lumber prices are again shooting up, and as of February 17, are nearly three times the levels seen as recently as August 2021. This latest jump on the trampoline is caused by a variety of factors, such as:

  • the November decision by the US Commerce Department to double its tariffs on Canadian softwood lumber imports to nearly 18%, despite the inability of domestic sawmills to meet US demand
  • damage caused to Canadian forests by a plague of mountain pine beetles and a strong wildfire season
  • labor shortages for sawmills that contribute to output lagging new home demand
  • broader inflationary pressures impacting operating costs

Are there reasons to believe that lumber prices will regress in the near-term? A receding of the Omicron wave could help ease labor and supply chain issues. Additionally, the Commerce Department could ease its tariffs on Canadian softwood lumber imports (as it did in 2020), which run contrary to both President Biden’s trade policy criticisms while running for president and his administration’s affordable housing goals. Lumber demand, in the meantime, will remain high.

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.