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.

Why Lots of Things We Buy Are Getting More Expensive…

The global economy is seeing shortages and historically high prices for things such as lumber, computer chips, plastic resins, corrugated board/boxes, and chicken – all products that have ripple effects into larger markets such as home construction, vehicle manufacturing, packaged goods, e-commerce shipments, and foodservice... what is going on here?

While there are often industry-specific challenges, there are several factors in common across much of the economy:

  • Shipping issues – there are shortages of containers (or containers in the wrong places), lags in unloading at ports, and shortages of commercial truckers that are slowing road transport
  • Supply constraint
    • from facility shutdowns or slowdowns, whether due to severe weather (e.g., processors of plastic resins were shut down during the February storms in Texas and still haven't caught up) or COVID outbreaks or operational restrictions (e.g., chicken processors)
    • from an inability to ramp up production any faster as some were already operating at full capacity in 2020, and while major investments are planned or underway, there are supply bottle necks at the machinery production level too
  • Demand-side issues as industries saw sales gains that were unprecedented, sudden, and even sustained

While some of these conditions existed in 2020, there were a lot of segments of the economy where we still didn’t see price increases until recently. Why not? Some retailers and manufacturers have had a sort of “decency pressure” on them…they haven't wanted to be seen as taking advantage of a pandemic so they have refrained from raising prices in some cases. However, that period is likely over. With more people vaccinated and fewer people dying, there will be less of a feeling that rising prices indicates profiteering in a crisis. Suppliers increasingly see their price increases as justified and fully in line with their rising costs.

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.

  Automotive & Transport      Chemicals      Construction & Building Products      Consumer Goods      Covid-19      Food & Beverage      Industry Studies      Machinery & Equipment      Packaging      Plastics & Other Polymers    

Continuing Demand for Warehouse Space to Spur Construction Activity

According to a recent article, demand for warehouse space remains strong, spurred by:

  • continuing consumer interest in e-commerce, which has caused substantial increases in the number of packages mailed across the US
  • high levels of building construction activity, boosting shipments of bulky building materials, such as lumber, roofing, and siding
  • supply chain difficulties that have led to products spending more time in warehouses before they are sent to their final destination

This need for warehouse and distribution will support the construction of new storage facilities, driving demand for such materials as:

  • prefabricated metal buildings and components, such as insulated wall panels
  • prefabricated metal and wood roof and floor trusses
  • concrete for building foundations, floors, and ramps and loading docks
  • large overhead metal doors
  • insulation (for those structures holding refrigerated and frozen items)
  • wood and metal grating flooring (for multi-story storage facilities)
  • wiring, lighting fixtures, and electrical components

Furthermore, as more warehouses and storage facilities are erected, other products will be needed to outfit these buildings, including:

  • pallets
  • metal racking and supports
  • conveyor belts and other package retrieval system components
  • materials handling equipment, such as forklifts

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.

  Chemicals      Construction & Building Products      Covid-19      Metals      Minerals & Glass      Plastics & Other Polymers    

Biden Administration to Investigate Global Supply Chain Issues

On February 24, US President Joe Biden signed an executive order mandating that federal agencies conduct a 100-day review of critically important supply chains, as the COVID-19 pandemic has raised focus on issues regarding access to certain products and materials generally sourced from abroad (and particularly those from China).  The review will focus specifically on four items, some of which have faced supply chain problems even before the pandemic:

  • Semiconductors:  Access to these chips, which are used for multiple purposes in motor vehicles and also are essential components of iPhones, personal computers, smart TVs, gaming systems, and more, increasingly became a problem during the pandemic. As remote working became more commonplace, demand for these chips increased greatly to accommodate the need for more personal computers and laptops. Additionally, trade restrictions placed on imports from China also caused difficulties, as many of China’s leading chip manufacturers had export restrictions placed on them by the United States. Additionally, some of these companies claim plans to expand manufacturing to the United States have been hindered by national security concerns raised by the Committee on Foreign Investment in the United States (CFIUS), due in part to the possible military applications of these products. The US-based Semiconductor Industry Association claims that the US’s share of global semiconductor manufacturing has fallen from 37% in 1990 to 12% today, and US manufacturers are pushing the White House to work with Congress to provide investment that they claim will support research and design operations and to increase domestic semiconductor production.
  • Pharmaceuticals: Shortages in certain drugs during the pandemic has also prompted a deeper examination into the pharmaceutical supply chain. A combination of increased demand for drugs to address the rising number of hospitalizations and the shutdown or slowdown of some international shipping ports led to key shortages. There are also concerns about being too reliant on China for key pharmaceutical ingredients, which has doubled over the last decade
  • Electric vehicle batteries: Global manufacturing of electric vehicle batteries is currently heavily concentrated in China, with Japan and South Korea ranking numbers two and three leading manufacturers, and the US back at number six, according to a report from S&P Global. With major US automobile manufacturers increasingly focusing on electric vehicles – including General Motors, which has announced that it intends to phase out all gas-powered vehicles by 2035 – reliable access to these batteries will be crucial in the coming years. 
  • Critical minerals: Rare earth minerals are used in a wide variety of applications, including airplanes, steel, light bulbs, wind turbines, and many more. Supply chain issues for these minerals long predate the COVID-19 pandemic, as China is the leading global producer of rare earth minerals. This problem of production being so heavily concentrated in a single country has been intensified by some of the Chinese government’s behavior in the past, including a brief restriction of rare earth exports to Japan in 2010 in response to a dispute in the East China Seas. These concerns have led to increased efforts from the rest of the world to ramp up rare earth mineral production, which has lowered China’s share over the last decade from around 98% down to 63%. In a continuation of efforts from the Obama and Trump administrations, Biden’s executive order will examine means of addressing weaknesses in the rare earth minerals supply chain. This will likely include both strengthening the US rare earth mineral industry and transitioning reliance on imports to countries with whom the US has friendlier reliance – primarily meaning a transition away from China.

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.

  Automotive & Transport      Construction & Building Products      Consumer Goods      Covid-19      Energy & Petroleum      Food & Beverage      Industrial Components      Machinery & Equipment      Metals      Packaging      Plastics & Other Polymers      Tariffs      Textiles & Nonwovens    

Increase in Packages Shipped Spurs Demand for Tape

Regular readers of this blog know that one of the many changes the US has undergone as a result of the COVID-19 pandemic has been a dramatic increase in the number of packages shipped, as people continue to shop from the comfort – and safety – of their own homes. This is one trend that shows little, if any, sign of abating going forward.

For instance, in The Freedonia Group National Online Consumer Survey (conducted November – December 2020), 65% of respondents said they were currently shopping in brick-and-mortar stores less because of the coronavirus pandemic and 56% said they were shopping in stores at off-times more often because of the pandemic. Similarly, 28% of respondents noted that they subscribed to Amazon Prime because of the coronavirus.

Thus, the recent announcement by Intertape Polymer Group – one of the leading US manufacturers of tape and other packaging supplies – that it would expand its production center in Danville, Virginia should not come as a surprise. The surge in packages shipped has in turn driven demand for tape and other materials used to keep packages – and their contents – safe and intact during shipment. Indeed, with US consumers continuing to prioritize online shopping over in-store visits for the foreseeable future, consumption of tape will also rise, thus ensuring that this additional production capacity will not be idle.

For more information and a discussion of market opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research related to the packaging industry, including Global Corrugated Boxes,Corrugated & Paperboard Boxes,Protective Packaging,Global E-Commerce Packaging,Stretch & Shrink Film,Global Pallets,Bubble Packaging,Insulated Packaging Containers & Shippers,Protective Mailers, andGlobal Packaging Machinery. Related analysis from our sister publisher Packaged Facts can be found in these reports: Amazon Strategies and the Amazon Shopper, Consumer & Corporate Food Gifting in the U.S., Food Carryout & Delivery, and Global Food E-Commerce. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Chemicals      Covid-19      Packaging      Plastics & Other Polymers    

Expansion of PVC Production Capacity Spurred by Pandemic-Related Demand

The recent announcement by Shintech that it would expand its PVC production capacity in the US demonstrates that many of the changes to the US economy caused by the COVID-19 pandemic are expected to continue going forward – and companies are adjusting accordingly.

The large majority of PVC use in the US is in the construction market, which – as regular readers of the TFG COVID-19 tracker know – has been a source of strength to the economy as homeowners have invested in their residences with a number of improvement and repair projects. This trend is expected to continue going forward as homeowners will continue to remodel and renovate their homes. Furthermore, home building is forecast to continue at a brisk pace as people seek to move out of multifamily dwellings in densely populated urban cores, instead opting for single-family homes in suburbs and exurban areas.

Continuing growth in construction activity will boost demand for a wide range of vinyl building products, key among them:

  • window and doors
  • flooring – especially popular luxury vinyl tile (LVT)
  • pipe – drain, waste, and vent (DWV); conduit; and larger-sized sewer and wastewater pipe
  • decking
  • siding (especially insulated varieties with foam cores)
  • low-slope roofing materials
  • laminates used in cabinets and home furnishings
  • jacketing for wire and cable

In addition to construction materials, another key market for PVC is for medical products, which saw strong demand growth in 2020.  Efforts to combat the COVID-19 pandemic have required the use of numerous vinyl-containing products, including:

  • tubing and catheters
  • bags and pouches
  • medical device components
  • medical and pharmaceutical packaging

Even as COVID-19 cases recede as vaccination rates rise, healthcare facilities will continue to consume large quantities of medical supplies, many of which will be made with PVC.

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 as well as packaging-related topics such as Pouches, Converted Flexible Packaging, Medical Device Packaging, and Global Disposable Medical Supplies. 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.