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.

Return to the Office?

Much was made this week of Elon Musk demanding Tesla workers to either return to the office at least 40 hours per week or resign.

While some companies are increasing the expectations that their workers be in the office more frequently, this isn’t a trend that holds everywhere. Especially in metropolitan areas famous for long commute times.

This week, the Wall Street Journal reported that there was a high correlation between long average commute times and reductions in office occupancy. “Eight of the 10 major cities with the biggest drop in office occupancy during the pandemic had an average one-way commute of more than 30 minutes in 2019. Meanwhile, six of the 10 cities with the smallest drop in office occupancy have average commutes of less than 30 minutes.”

But why are there long commutes in the first place?

First, there are the factors that drove workers to live further away from city centers, including:

  • lack of housing, especially affordable housing, close to where the jobs
  • seeking out better schools
  • desire for more green space
  • concerns about urban crime

But we can’t ignore the fact that transportation infrastructure hasn’t kept up with changes in demographics and commuting patterns.

As employees who could work from home during the pandemic did so, they learned that they could do their work just as well from home. Some even moved further away from city centers to get more space for a home office and/or more outdoor space.  While many missed the camaraderie of lunches with co-workers and chats around the coffee pot, they discovered that the absence of a long commute returned time to their day. The daily grind of the commute was more tradition than necessity.

What might come of this?

  • More companies may open satellite meeting or work spaces closer to where their employees live.
  • If more funding can be provided, transportation infrastructure – from roads to public transit – can be improved to shrink commute times.
  • Excess office space can be converted to residential space to allow more workers to live closer to urban work spaces.

These longer-term possible developments would allow the creation of more balanced neighborhoods.

Freedonia analysts will continue to watch these trends to see how remote-work, return-to-work, and urban and suburban office adjustments change not only construction activity, and where service business locate and how they operate, but also how we live in general.

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

  Custom Research      Industry Studies    

Rising Prices Are Another Reason for Out-of-Stocks at Grocery Retailers

Grocers are pushing back against food suppliers over rising prices.

Some grocers are refusing to stock goods if the food suppliers can't justify their price increases, won't negotiate, or won't delay price increases...especially if they have a similar item (e.g., another brand, same product in a different package size, fresh v. frozen) that is selling well.

This is expected to have an effect on product assortment at your local grocery store. There will likely be fewer new products, more store brands, possibly fewer specialty items, and different cuts/types of meat, among other effects.

Even if the negotiations with food suppliers don’t result in lower prices, it's good press for the grocers to be able to tell their shoppers they are fighting for them.

On the other side of the coin, food suppliers know they have to watch out for customers who might find alternatives and start switching which products they buy. While they have to guard against loss of profit margins, it's expensive to win back a customer after they have developed new shopping habits.

Our expectation is that this trend is not limited to food and will also be happening – where it isn’t already – in other markets and industries hit harder by inflation. More companies are pushing back (where they have the power) and seeking alternatives.

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, Packaging industries, and Automotive & Transport industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Custom Research      Food & Beverage    

Trouble For Ultrafast & On-Demand Delivery

In the past week, there has been a flurry of announcements of cut-backs, closures, and staff reductions from delivery firms, particularly the ultrafast, on-demand delivery service providers.

The home delivery industry more broadly has seen its share of innovations, developments, and growing pains… but what’s going on now?

  • A tight labor market and rising labor costs are making it hard for delivery companies of all stripes to find the workers they need at a cost that allows them to keep prices at a level consumers will accept.
  • Rising grocery costs are leading consumers to think twice about convenience spending for delivery services.
  • Supply chain troubles are making it harder for on-demand delivery firms to ensure that they will have what a customer needs when stocks are low and out-of-stocks are common.
  • More grocery stores have developed their own in-house delivery services, including Walmart’s in-home delivery option.
  • Curbside pickup operations have matured to function better and more seamlessly, with a greater number of pickup times run more efficiently to accommodate more customers with less waiting.
  • More consumers are willing to venture out and do their own grocery shopping as pandemic fatigue is rampant despite ongoing high infection rates.
  • Getting enough early state funding is problematic for some, particularly as a few on-demand service providers relied on investments from Russia.

Still, there are opportunities as better established delivery firms expand beyond an initial grocery or foodservice scope. The more broad use of predictable subscription orders will also add efficiencies. Technological improvements from electric vehicles to AI-assisted ordering and drone delivery (for small orders anyway) will allow for cost reductions and greater efficiencies in more areas.

The delivery industry will continue to innovate and Freedonia analysts will continue to watch trends for additional opportunities.

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, Packaging industries, and Automotive & Transport industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Food & Beverage    

Inflation, the US Food Market, & Consumer Behavior

There are a lot of factors behind rising prices in food, including still high demand for cooking at home, rising cost to transport food, supply challenges as processors shut down temporarily or issue recalls, seasonal/climate/weather challenges to crops, and global shifts in supply due to crisis points such as the war in Ukraine and sanctions on Russia.

Many consumers are concerned about rising or otherwise inflated prices in several product categories, but concerns are highest for food. In the Freedonia Group National Online Consumer Survey conducted in October-November 2021, 56% of respondents reported being very concerned about rising food prices. In the November-December 2021 edition of the survey, 50% of consumers strongly agreed they were concerned about rising food prices. By the February 2022 survey, this figure had jumped to 60% of consumers.

Similarly, in the October-November 2021 survey, 49% of consumers reported they were very concerned about food shortages. In the November-December 2021 survey, 27% of consumers strongly agreed they were concerned about shortages of food they typically buy, and this figure grew to 39% in the February 2022 survey.

Shortages typically mean higher prices; low supply and/or high demand brings on higher prices. So, people who are concerned about shortages are also showing their concern for rising prices. Consumers who are expecting the things they buy (in this case food) to become less available and for prices to rise will stock up now, thus assuring themselves of enough stock locked in before prices increase even more.

However, that is a self-fulfilling prophesy. As more consumers buy ahead of their need, that messes with supplies as manufacturers can’t keep up with demand, resulting in more shortages on shelves and driving prices up even more.

Freedonia analysts continue to watch inflationary trends for direct and indirect effects throughout the economy.

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 and Packaging industries, as well as Food & Beverage coverage from our sister publisher Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Food & Beverage      Packaging    

Urban Living Transitions: Tier 2 Cities, the Suburbs, & Rural Areas

A much discussed trend of the last few years is the pandemic era exodus from cities to the suburbs and rural areas…and potentially back again.

However, something to keep in mind: the Census figures being discussed in many of these articles are for the actual city boundaries, not metro areas. So when you see cities like Chicago and New York losing population, it includes people shifting to the suburbs just outside the city limits. In that way, it is still counted as the city losing population, even though people may not have moved that far away.

What makes those who move away from urban centers more likely to stick with their choice? It depends on their homeownership status and if they have kids. Homeowners are stickier in their location than renters are as the transaction costs to sell are much higher than moving at the end of a lease (or even breaking a lease, in many cases). Additionally, the move to the suburbs for the schools and larger yard when you have kids is an old story that repeats with each generation.

Still, for every article that has Millennials loving their new exurban lifestyle, there are ones about pandemic homebuyers who are miserable with the move to homeownership. They have maintenance responsibilities they didn’t have as renters and might be house-poor now, lacking the cash for the travel and events they would like to resume as the pandemic feelings ease.

But what are the effects of this movement – no matter the direction?

There are many implications to this trend. From building construction needs to the type of things consumers will be spending their money on. For instance, if you have that house now, are you investing in lawn and garden care equipment and supplies? Are you investing in a new deck? Are you buying paint and furniture? Or are you spending on travel and events and dining out?

Furthermore, this shift has implications also for infrastructure. Can investment in public transport and urban bike lanes be justified if city populations are falling and fewer people are commuting into the city?

This move to smaller cities, suburbs, and rural areas could also cause trends to spread differently. Classically, as people move, they take their tastes and preferences with them to their new homes. A primary example is the spread of international food trends along with immigration. While urban centers of Tier 1 cities are often the source of trends – from food to recreation to style and beyond – that might change. First, those leaving the urban centers will bring those tastes with them and businesses will form in smaller cities and suburban areas to give them what they want.

So not only will moving to the suburbs change the habits and preferences of the former urban dwellers, but their movement into the suburbs and rural areas will change these locations by their arrival. This could lead to trends spreading faster into smaller cities and rural areas.

What should we watch? Remote work trends are worth watching as it is a good part of seeing whether the exodus from urban centers holds. As more people no longer needed to consider commute times in selecting where to live, they could cast their real estate nets a little wider, sometimes even out of state. This opened up options to these people, and since they bought homes, they are now more sticky in their location compared to urban renters.

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

  Industry Studies