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.

Supply Chain Alternatives: Will Rerouting to Florida Make the Difference?

The term “supply chain” was, before the COVID-19 pandemic, known to but a few Americans. However, the phrase is now on everybody’s lips as consumers confront empty shelves, rising prices, and few answers as to when the crisis will abate. One key bottleneck in the supply chain is that the California ports – such as those in Long Beach (near Los Angeles) – do not have the capacity to unload all of the ships sailing outside their harbors as quickly as they would like.

A potential solution to the problem has been floated: recommending shippers to reroute to use ports in Florida instead. While the journey would add about two weeks and cost more money for ships currently in the Pacific to reach Florida (even longer if the vessel is too large for the Panama Canal), once there, 8 of the 15 Floridian ports are able to accommodate container ships. However, only two have channel depths as deep as those on the west coast so as to accommodate the biggest container ships. Still, there are others further up eastern coast that have similar channel depths to the Ports of Long Beach, Oakland, Sea Tac Alliance, and Vancouver. 

Furthermore, some suggest that rail and truck capacity in the region is under less stress compared to the facilities in California, making it easier to find the railcars, locomotives, and tractor-trailers needed to move off-loaded cargoes to their final destination. Thus, it may be time- and cost-effective for some shippers to make the lengthy voyage from the Pacific to the Atlantic coast.

However, shipping experts suggest this is more of a long-term potential solution rather than something that is going to solve the crisis in the next few weeks or months. Shippers are already paying historically high rates for shipping containers and may balk at adding even more cost to traverse the Panama Canal. Even among those that decide the cost is worth it, few will be making that change immediately due to the need to realign other shipping plans as most containers that dock are already booked for outgoing goods at the originally intended port.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Freedonia Focus reports such as Freight by Waterways: United States, Freight Services: United States, and Freight by Truck: United States. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Freedonia Focus      Industry Studies    

How Movie Studios Are Reacting to the COVID-19 Pandemic

States are taking a variety of steps to help curb the spread of COVID-19, from limiting the size of public gatherings to shutting down movie theaters and other entertainment spaces. This has caused the nation’s two largest theater chains, Regal Cinemas and AMC Theaters, to temporarily shut down all of their theaters in the US.

Unsurprisingly, theater closures are bad for business for the nation’s movie studios. Theatrical releases are scheduled up to a year in advance, and theaters are the main revenue generator for movies that cost hundreds of millions of dollars to produce and market.

Some studios have opted to delay releasing big-budget films until later in 2020, with the hope that the COVID-19 pandemic will be contained and consumers will feel more comfortable congregating in theaters again. NBCUniversal, however, is taking a slightly different approach. In addition to delaying some its releases, the studio also announced that it would release select movies as a digital rental, priced at $20, at the same time as or recently after its theatrical release.

Granted, the movies that NBCUniversal has selected so far are not among its biggest revenue generators, so the risk of lost sales is not as large. However, for an industry that has long resisted altering its business model even as consumers have changed how they view most of their entertainment, this shift is significant and could have a long-term impact on the theaters that support movie studios’ revenue.

Basically, businesses must address this uncertain environment by considering how they can continue to reach and serve customers, even if they have to use avenues they had previously resisted.

For more information see Freedonia Focus’ Motion Pictures & Video: United States and Recreation: United States reports. Freedonia Custom Research is available for questions requiring tailored market intelligence.

  Covid-19      Freedonia Focus    

US Federal Reserve Makes an Early Rate Cut

On March 3, 2020, the US Federal Reserve cut its target interest rate by 0.50% to 1.00%-1.25%. The move was the first to occur outside the regularly scheduled policy meetings that take place every 6 weeks since the 2008 economic crisis. The Fed did not want to wait as concerns about the spread of the coronavirus in the US caused strong volatility in the US stock market. The move signals that the bank will take rapid, significant steps to counter effects of the virus on the economy. If it continues to spread, consumers and companies may limit gatherings and unnecessary interactions, which will reduce consumer activity as well as economic output in the markets they support.

Reduced interest rates could help many sectors. For instance, borrowing funds to buy a house, a car, or other large durable goods will be less expensive. In addition, companies will be able to obtain lower-cost loans to help them through a period of reduced economic activity or supply chain difficulties. However, the lower interest rates might hurt the banking industry, as commercial banks generate a significant portion of their revenues from interest on loans.

For more information on these sectors, see the relevant publications from Freedonia Focus Reports: Air Transport Services: United States, Commercial Banking: United States, Housing: United States, Motor Vehicles: United States, Recreation: United States, Restaurants & Foodservice: United States, and Water Transport Services: United States.

  Covid-19      Freedonia Focus