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.

The West Comes Together to Enact Harsher Economic Sanctions on Russia

After the initial measures taken by the West to prevent Russia’s invasion of Ukraine failed, the goal of new economic sanctions has moved from deterrence to punishment.

Western backlash to Russia’s invasion of Ukraine has been uniformly severe. Some significant new economic sanctions were implemented on February 24 by the US and the European Union, including:

Over the weekend, the severity of the sanctions was ratcheted up significantly.  Among the most impactful of the new measures were:

  • banning Russia from SWIFT system access: Russia has now been cut off (as Iran was in 2018) from access to the SWIFT financial messaging system that facilitates rapid and secure cross-border payments. While Russia has its own internal alternative to SWIFT, it is far less sophisticated, and thus an exclusion from SWIFT will impose massive costs on the country, particularly in the short term. Initial holdouts from Germany, Italy, and Hungary, which in part wished to keep SWIFT expulsion as a deterrence against further Russian transgressions (with some feeling that extensive business ties between banks in these countries and Russia also fueled reluctance), softened their stances over the weekend in order to support harsher sanctions.
  • US sanctions on Russia’s central bank: The Biden administration moved to prevent Americans from doing any business with the Russian central bank and to freeze its assets in the US, which, as of Monday morning, was helping to send Russian markets into meltdown  

These measures will substantially impact both the Russian and global economies.  Metal commodity prices will be especially impacted in the areas in which Russia is a major player, discussed in an earlier Freedonia Impact Tracker.  Additionally, industries that rely heavily on exports to Russia will be affected by a short-term free fall in Russian consumer purchasing power, as the value of the ruble had declined by about a quarter as of Monday morning relative to its Friday level.

Given the substantial escalation of sanctions on Russia, will its energy sector be next? Oil and gas account for 60% of Russia’s exports and 36% of its budget revenues, and restrictions on the import of these products in the West would be the clearest way to strike a devastating financial blow to Russia. However, it is unlikely to be targeted in the near term. A big reason for this is fear of driving oil and gas prices higher. Surging energy prices were a key concern for consumers before the invasion of Ukraine, and already, oil prices have jumped over $100 a barrel as many fear the conflict may lead to a supply disruption. Punishing Russia’s energy sector would push prices even higher, which would be unpopular to both to Western consumers and governments. Additionally, Europe – which currently relies on Russia for 40% of gas consumption – would not be able to entirely shift away from Russia and toward smaller supplier countries in the short term even if it wanted to.  However, other steps have been taken that may harm the Russian energy industry in the long-run, such as Germany mulling an extension of the lifespan of its nuclear power plants, which would reduce its dependence on Russian gas.

Freedonia analysts continue to watch changes in geopolitical positioning – including any additional sanctions that might accompany this crisis – as well as related effects on the supply of key industries and currency fluctuations.

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.

  Custom Research      Industry Studies    

Labor Challenges: Where Did the Workers Go?

Labor issues are a common theme among the news and among analysts around the virtual watercooler... but just where did these people go?

  • Some left for better paying jobs in other industries
  • Some left for better working conditions in other industries
  • Some retired
  • Some died as COVID-19 hit the US population hard
  • Some left the workforce to provide caregiving for family members, children and/or the elderly, especially with remote schooling, limited access to quality day care, concern about elder care living facilities in light of pandemic isolation and tight staffing, and an aging population
  • Some chose to work part-time
  • Some did not immigrate, as international movement slowed in the pandemic period

Many companies have been turning to automation and artificial intelligence to cover the gaps. However, public policy and workplace innovations will be needed to fill the gaps left by these changes in the workforce. To be clear, changes were needed as the retirement of the large baby boomer cohort was inevitable and pending, but pandemic era-related changes accelerated the need.

Freedonia analysts will continue to watch trends affecting the workforce, from labor participation, immigration, and retirement trends to automation, employee incentives, workplace flexibility, and other solutions.

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.

  Custom Research      Industry Studies    

Refrigerated Grocery Pick Up Lockers Can Increase Efficiency Amid Worker Shortages

In a labor market where workers can be hard to come by and customers still have high expectations for quick service, retailers must get creative.

Although pickup lockers have been used by Amazon and others as a convenience, especially in urban areas, these lockers are not climate controlled. However, the rise of curbside pickup for grocery is making the need for refrigerated lockers increasingly important.

As processes exist now in most places, curbside grocery pickups have to be timed so that there are workers available to collect the groceries shortly before the consumer picks them up in order to limit the time the perishable food is away from refrigeration. Some stores have made florist coolers or newly constructed refrigeration areas near that door a place to keep collected groceries. However, space is still usually limited.

In some instances, consumers hoping to collect orders during peak periods have to wait a long time in the parking lot, get a message that they will not be able to get their order that day, or have to schedule pickups for a less convenient off-peak time. The use of refrigerated grocery pickup lockers would allow more workplace flexibility, as workers could collect the orders when time allowed and more orders could be collected at the same time without waiting for a worker to be available to bring it outside to their car.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Global Commercial Refrigeration: Food Retail Market. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Consumer Goods      Food & Beverage    

Cummins & Meritor: Sustainability & Expected Growth of Electric Heavy Trucks Drives Acquisition

This week, the major engine manufacturer Cummins announced it will be acquiring Meritor, a leading supplier of vehicle parts. Executives say expected growth in electric heavy vehicles and the need to lead in this area was the key to this purchase.

The two companies are doing complementary research and development. Cummins is developing electric power trains, and Meritor is developing components for electric trucks, such as axels which have integrated electric motors.

Since it is often less expensive and easier to acquire needed technology than to undergo in house R&D or purchase the technology from a third supplier, expect to see more acquisitions relating to sustainable technologies, particularly among companies with complementary pursuits.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including the update of Global Hybrid & Electric Vehicles which is in progress now and Global Medium- & Heavy-Duty Trucks & Buses and Medium- & Heavy-Duty Trucks & Buses: United States from Freedonia Focus. Freedonia Custom Research is also available for questions requiring tailored market intelligence


We Bought All the Stuff… Is the Services Economy Our Next Spending Boom?

During the pandemic years, consumers couldn’t travel or go to large events, so spending switched from what had been an economy of experiences to an economy of stuff. We bought stuff to entertain at home, create a home office, make home cooking more fun and more efficient, make our pets comfy, workout at home, etc.

Now that many of us are vaccinated and the wave of infections from the Omicron variant has eased, are we ready to go on vacation?

While 75% of respondents to the October-November edition of The Freedonia Group National Online Consumer Survey noted that they were somewhat or very concerned about the current and future variants of the COVID-19 coronavirus, consumers are increasingly acting as if they are not concerned. While not all are traveling or going on vacation now, more people seem to be seeing the light at the end of the tunnel (or at least a willingness to see things as set for now) and are increasingly eating out, planning vacations, concert attendance, weddings and family reunions in the coming year.

This could result in reduced spending on our homes, yards, pets, etc. Of course, with work-from-home still common in many parts of the economy, there will still be call to buy what we need/want to keep our homes comfortable and functional.

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.

  Consumer Goods      Industry Studies