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.

High Prices, Lack of Product Availability Affect Sales by Building Materials Retailers

The latest retail sales report by the US Census Bureau showed that retail sales by building materials and garden equipment and supplies retailers declined more than 2% in November. While retail sales for the year were up more than 13% compared to 2020, this fall in sales for the month was a matter of concern for many in the industry. The drop in retail sales could be attributed to a number of factors, key among them being:

  • rising lumber prices and continuing high prices for a wide range of building materials
  • shortages of Christmas trees (which are often purchased at garden supply centers and big box retailers) in some parts of the US
  • a slowdown in DIY activity by homeowners as autumn turned to winter – homeowners are less likely to undertake home improvement projects in inclement weather
  • the end of hurricane season, when lumber and other materials used to fix and repair structures are often purchased in the aftermath of storm landfalls
  • a retrenchment in consumer spending as the holiday season approaches – some consumers reduce discretionary spending in anticipation of an increase in spending in December

Looking forward, building materials and garden equipment and supplies retailers are anticipating an uptick in sales in December. Prices for lumber and other building materials are expected to remain high – as will new home construction, boosting sales of these products. Furthermore, December has traditionally been a time when people bought “big-ticket” items as gifts for themselves or others. Sales of these items – which include appliances, power tools, and lawn mowers – are expected to be good, as many consumers will continue to invest in their homes, such as by replacing older appliances or upgrading lawn and garden equipment to maintain the exterior appearance of their residences.

TFG analysts will continue to monitor retail sales – as well as numerous other indicators – to gauge their effects on the US economy going forward.

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.

Initiative to Remove Lead Service Pipes a Boon to Construction Industry

Some of the more searing images to hit the collective US conscience over the past few years have been the scenes of people in Flint, Michigan lining up to receive bottled water due to concerns about the safety of their city’s water supply. This process – caused by the realization that their network of lead pipes were decaying and thus contaminating local water supplies – called attention to a nationwide problem: thousands of localities across the US still have lead service pipes that carry potable water into homes and businesses. Efforts to remove these pipes have been stymied by the large numbers of pipe installed, the difficulty of the work (often requiring much excavation), and the cost of replacement pipe.

Recently, though, the US government announced a new initiative to replace all of nation’s lead pipes. This $15 billion initiative will enable the removal of pipe networks to the nearly 10 million residences in the US with lead pipes and their replacement with newer and safer materials. Work on these projects, which is scheduled to begin in 2022, will boost demand for a wide range of building materials, key among them:

  • pipe – depending on local building codes, these pipes can be made from plastics, precast concrete, galvanized steel, and clay
  • fittings, such as flanges, wyes, connectors, and other pipe system components
  • plumbing fittings, such as faucets and tips, that have also come into contact with lead-contaminated water
  • paving materials – in many cases, pipes lie underneath streets, driveways, and porches, requiring the replacement of concrete and asphalt

In addition to these materials, thousands of plumbers, pipefitters, and other trained construction personnel will be needed to complete these tasks. Furthermore, such equipment as excavators, bulldozers, jack hammers, augers, and other specialized products will be required for the work – a not unimportant consideration for suppliers of construction equipment. 

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly our series of studies in the Construction and Building Products catalog. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

Recent Announcements Indicate Strong Demand for Building Materials

As 2021 comes to a close, the US building construction industry will look back with fondness as it considers its balance sheets. Despite supply chain issues that often caused shortages of raw materials and delayed shipments of finished products, participants across the US building construction industry – manufacturers, distributors, and contractors – generally experienced strong sales throughout 2021. Bolstered by continuing high demand for new housing and homeowner interest in renovation projects, demand for a number of building products was at an elevated level throughout the year. 

For many construction professionals, the question now is what will the market look like in 2022? A pair of recent announcements by leading building product manufacturers indicates that the market will remain strong going forward:

  • CertainTeed – a leading supplier of a wide range of building materials – announced plans to expand production of gypsum board, asphalt shingles, and insulation
  • Kohler – one of the largest suppliers of plumbing fixtures and fittings – announced plans to construct a new manufacturing plant in Arizona

These new and expanded production centers indicate the companies believe that the US construction market will remain bullish in 2022 (and beyond). With housing starts expected to remain at a high level going forward, this will boost demand for gypsum wallboard, asphalt shingles, and insulation – all of which are used extensively during the home construction process. Furthermore, home renovation activity is expected to remain strong in 2022, as homeowners continue to refurbish older homes or remodel residences to make them more suitable for post-coronavirus living, such as by adding or expanding rooms, remodeling kitchens and bathrooms, or converting little-used spaces into home offices and gyms. All of these projects will also spur demand for building materials.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly our series of studies in the Construction and Building Products catalog. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

Delta… Omicron…? Are Consumers Concerned About Current & Future COVID-19 Variants?

Many of us started 2021 with a lot of hope…highly effective and safe vaccines were arriving and were being distributed in increasingly wide circles.

Then came the variants.

The Delta variant, which spread widely in the summer and through the fall, was determined to be more aggressive with more contagion and illness even in children. After investigations, the vaccines were found to be effective against Delta. However, children and many adults were still not vaccinated.

With the winter holidays upon us came news of the Omicron variant. First discovered in South Africa and rapidly spreading globally.

The thought among many was “here we go again…” as unvaccinated populations remain vectors for variants to develop and spread, including the potential for ones which could evade current vaccine protection.

But is it? There’s no denying that many if not most are suffering from some level of “pandemic fatigue” and are tired of COVID driving or effecting their decision making. Still, the rise of a new and yet unknown variant as we prepared to gather for the holidays introduces a level of uncertainty into the economy.

In the October-November edition of the Freedonia Group National Online Consumer Survey (conducted October 16-November 5, 2021), 33% of respondents reported being very concerned about the Delta variant of COVID-19 and potential future variants. Another 42% reported being somewhat concerned about them. Only 11% said they were not concerned at all.

The concern is highest among people:

  • age 35-39 – more than half are very concerned and a total of 86% are either somewhat or very concerned
  • with children under 18 in their household – 78% were somewhat or very concerned compared to 71% of those who did not have children in their household. People with children aged 6-11 were most likely to report that they were very concerned (41%).
  • who work from home more than usual because of the pandemic – 47% reported being very concerned and a total of 86% were either somewhat or very concerned. In contrast, among those who do not work from home more, only 25% were very concerned and a total of 70% were at least somewhat concerned.

This survey was conducted before the Omicron variant began to be reported in the news. The Freedonia Group has another edition of the survey being conducted now, which will reflect that news. Freedonia analysts will remain vigilant of changes in consumer sentiment as we wrap up 2021 and move into 2022.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly our series studies in the Consumer Goods catalog. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Industry Studies    

Corporate Deal Making Still High as Major Conglomerates Announce Breakups & Realignments: Toshiba, Johnson & Johnson, General Electric, DuPont… & More

The business world experienced a wave of change this past few weeks as four conglomerates announced plan to break up into a number of smaller firms:

  • Toshiba released plans stating that it would divide into three firms: one focused on infrastructure and construction operations, a second concentrating on electronics, and a third devoted to memory storage solutions.
  • Johnson & Johnson announced that it would separate its consumer products division (maker of Band-Aid bandages and Tylenol pain reliever) from its medical device and prescription drug operations.
  • General Electric – perhaps one of the most famous of these conglomerates – stated it would complete a long chain of divestitures and separate its healthcare, aviation products, and power systems businesses.
  • DuPont, which has been reorganizing over the past two years since its separation from DowDuPont (other surviving units include Corteva and Dow Chemical), announced it plans to sell much of its Mobility & Materials segment, including the Engineering Resins and Performance Resins lines and its stake in the DuPont Teijin Films joint venture. At the same time, it reported it would buy Rogers Corporation, a key suppliers of high performance materials in the electronics market.

The reasons for these breakups vary. For Johnson & Johnson, the decision was based on the fact that the divisions had evolved into different focuses and customer bases (consumers in the one, healthcare professionals in the other) and a separation was a logical choice. DuPont is also reorganizing toward a high growth portfolio. In DuPont’s case, it’s leaning into next generation solutions in electronics, water, protection, industrial technologies, and automotive. For GE and Toshiba, the moves were done after years of concern that by keeping their varied units together, shareholders were not receiving as much of a return on their investments as they should have been; thus, these moves were welcomed by the investor community (if not by the more tradition-minded).

Will the market see more of these moves? It is a distinct possibility; companies tend to cycle between eras of building up portfolios and eras of contracting to a reshaped view of core competencies. Additionally, as some investors are looking for more exotic opportunities – Bitcoin, crypto, SPACs, shorting – some companies will decide that it might be worthwhile to create their own buzz and separate into two or more firms, thus unlocking shareholder value.

Others, though, may continue to see value in diversification – especially as the US and global economy tries to navigate a challenging world of COVID, inflation, and supply chain difficulties.

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.

  Industry Studies      Services