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.

Masks… Still. Masks… Again.

While many never stopped wearing masks and some never wore them consistently and properly, guidance from the CDC this week shifted back to recommending wearing masks indoors, regardless of vaccination status, particularly in areas with high transmission of COVID-19.  

In response, some major retailers such as Walmart are reintroducing mask mandates for their staff and placing signage that strongly encourages customers to wear masks as well. Other companies are considering following suit.  

Additionally, the American Academy of Pediatrics released guidance recommending that all students over 2 years old and all staff – regardless of vaccination status – wear masks while indoors.

The result of all this extended and reintroduced mask wearing means sales of masks have been perking up again as well. The reusable masks many of us have been wearing for months are starting to look it, particularly those worn by children who are prone to fidgeting with or even chewing on them. Faced with continued occasions to wear them and the prospect of wearing them for another season or another year, many are starting to shop for fresh masks again.

First responders and medical personnel still need their stocks as well, but suppliers of N95 medical-grade masks, such as 3M and Honeywell, are seeing decelerations in demand. Still, suppliers are being sure to keep production flexible and ready for future emergencies.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly titles such as Global Disposable Masks & Respirators, Global Meltblown Nonwovens, Global Spunbond Nonwovens, US Nonwovens, and Medical Nonwovens in the Textiles & Nonwovens segment. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

Mergers & Acquisitions Are Booming in 2021: Key Factors Driving Increased Activity

M & A activity has been very busy this spring. Across a wide variety of industries, we’re seeing a range of announcements from market leader combos to roll-ups of smaller, regional operations. But what’s behind this rise in activity?

Here are a few key factors driving acquisition and divestiture activity across the economy in 2021:

  • Owners of smaller firms are looking to retire after their businesses’ survived the COVID-19 pandemic (or in some cases, these businesses struggled and owners did not want to rebuild).
  • Certain industries with high pandemic-era sales (e.g., construction goods suppliers, home improvement distributors/retailers, packaged food companies, grocers, lawn and garden equipment and supplies firms) are flush with cash and high stock values and are looking to expand.
  • Pent-up interest from the limited activity of 2020, as transactions that were planned or considered pre-pandemic were put on hold due to economic uncertainty or the difficulty of completing due diligence when you aren't traveling. Some of these previously planned transactions are now going through.
  • Expectations of higher tax rates are leading some firms to cash out now or to make shifts that put them on better footing.
  • SPACs (special purpose acquisition companies) are being increasingly used for acquisitions to expand existing public or private companies.
  • Companies are reevaluating their business operations in the post-pandemic era and are sometimes making changes to what they see as their core operations, or are building on key capabilities that have grown over the course of the pandemic.

Freedonia Group analysts are keeping watch across a wide variety of industries for changes that portend market movements and shifts in the competitive environment.

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.

  Chemicals      Construction & Building Products      Consumer Goods      Covid-19      Energy & Petroleum      Food & Beverage      Industrial Components      Machinery & Equipment      Packaging      Plastics & Other Polymers      Services      Textiles & Nonwovens    

What Tells You Things Are Heading Back to “Normal”?

Instacart recently released a blog entry talking about something they are calling “the Pudding Pack Index.” The company suggests that increased orders of classic lunchbox items like pudding packs, granola bars, and fruit snacks are solid indicators that the US economy is returning to normalcy – a sign that kids are going to school or camps, that families are going on vacations (particularly road trips), and parents are returning to their workplace.

Our economy is full of such informal modes of evaluation. For instance, a former FEMA director suggested the “Waffle House Index” – or the ability for local Waffle House restaurants to be operating – is a good indication of the severity of storm event.

So what other core indicators might we look at now that could portend a return to normal?

  • Vaccine Rates: That’s an obvious one…vaccinated people are more comfortable resuming their previous habits and can better do so safely, even if the adjustment may not be rapid due to newly formed habits or ongoing concerns about variants or unvaccinated family members
  • Brick & Mortar Store Traffic: Now, many people are likely to retain their online shopping out of convenience and new habits, but returns to in-person shopping indicate normalization
  • Office Occupancy Rates: The return – at least partially – of workers who shifted home during the pandemic would boost traffic at foodservice restaurants and aid the sagging commercial real estate industry
  • Miles Driven: Increases here would indicate more people commuting to work and more people traveling
  • Improvements in Retail Apparel Sales: Once we decide to set aside our pandemic athleisure and start buying fresh outfits for special events, evenings out, and professional looks, we’re planning for a life away from our couches and home offices

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      Food & Beverage      Packaging      Services      Textiles & Nonwovens    

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    

October Retail Sales Report: Categories Slow as COVID-19 Cases Rise & Economic Relief Remains Elusive

The October advance monthly retail sales report was released on November 17. One thing worth noting – for the uninitiated – is that this information is linked to sales by type of retail outlet, but that doesn’t fully align with sales of product categories in some cases. For instance, sales of sporting and recreation goods might be lower than one would expect because the data only count sales at stores that primarily sell these products and do not include items in this category that are sold at mass merchants like Walmart and Target, whose sales are classified elsewhere.

The October report shows some growth over September sales, but declines in the same period in more categories. The growth that happened was muted and generally below expectations. Sales were hampered by rising COVID-19 cases in much of the country as well as economic uncertainty as hoped-for government stimulus and financial support programs did not come to fruition.

The big winners overall for the year continue to be the same ones from last few months. However, even as they continue to show strength against same-month 2019 sales, they are increasingly off pandemic highs:

  • grocery/food retail stores – October 2020 dipped 0.2% from September 2020, but October 2020 was still up 10.3% from October 2019. This is a trend grocers and other food experts expect to continue as consumers continue to eat and cook at home more than pre-pandemic.
  • building materials/garden equipment dealers – October 2020 was only up 0.9% from September 2020 but still up 19.5% from October 2019. Although experts expect the DIY trend to hold, these elevated sales may falter as the seasons change and weather cools in much of the country; still, October sales were supported by things such as seasonal décor and outdoor heaters, something expected to continue through the rest of 2020.
  • retailers that operate outside of brick-and-mortar locations (including e-commerce not linked to conventional stores) – October 2020 was up 3.1% from September 2020, but October 2020 was still up 29.1% from September 2019. The convenience of e-commerce will make this trend sticky beyond the pandemic.

For the most part, the retailers mentioned above remained open during stay-at-home orders because they were considered “essential” businesses. Additionally, their product mix includes categories that continue to benefit from the shift toward staying home – e.g., home cooking over eating out and DIY home and garden improvements. Many consumers are still largely limiting their shopping to these types of retail outlets.   

Sales at sporting goods, hobby, musical instrument, and book stores – which saw rapid gains in June 2020 – experienced declines from that spike during July and August before improving in September and falling again in October. While back-to-school shopping and fall sports spending supported sales in September, October sales were more likely to be early holiday shopping. October 2020 sales were up 12.4% from October 2019.

A few other highlights:

  • furniture stores – October 2020 saw small dips, falling 0.4% compared to September 2020. This category is still in positive territory year-over-year as October 2020 sales were 5.2% greater than in October 2019. Creature comforts and furniture to support at-home work and learning continues to drive sales.
  • gas stations – October 2020 was up 0.4% from September 2020 but still down 14% from October 2019. People continue to leave home less often, and a reduced level of commuting and road-tripping is keeping sales at gas stations low.
  • clothing stores – October 2020 was down 4.2% from September 2020, which had been an improved month in an overall bad year for clothing sales. October is typically a month that signals fresh buying of cool weather clothes as the seasons change, but sales in 2020 were down 12.6% from October 2019. Bankruptcies are continuing in this market, although some are making it through and reopening after restructuring. Online sales and curbside pickups help sales at these stores.
  • Food services with drinking places dipped again in October, falling 0.9% from September 2020. Cooler weather is moving diners away from outdoor dining options that supported such sales in warmer weather. October 2020 sales are still seriously lagging 2019 same-month sales (-14.2%).

Economists and other interested parties – including Freedonia analysts – will be closely monitoring next month’s retail sales report to see how the holiday shopping season kicks off with Black Friday specials starting early and running through much of the month. There remains some hope on the horizon for the retail sector as sharply curtailed sales on services (limited travel, dining out, away from home entertainment, personal care services) leave most households with more money to spend on goods at retail, particularly as the holiday season approaches. Still, spikes in COVID-19 cases will hurt any retail that is not done via e-commerce as consumers again stay away from public places and as some areas limit or close dine-in options again.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the COVID-19 with a comparison to historical recessions. Food- and beverage-related reports are also available from our sister publisher, Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Construction & Building Products      Consumer Goods      Covid-19      Food & Beverage      Packaging      Textiles & Nonwovens