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.

Sanctions to Severely Impact US Exports to Russia

Severe sanctions placed on Russia by Western countries in retaliation for its invasion of Ukraine will have a crippling impact on the Russian economy. The blowback from these sanctions will hit US businesses as well. Per the US International Trade Commission, Russia was the 39th largest recipient of US goods exports in 2021, valued at over $5 billion. US exporters to Russia will be impacted by these sanctions in three big ways:

Freedonia analysts will continue to watch how sanctions and their after effects further along supply chains impact US and global economies.

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    

Inflation & Substitution Spending

As prices for certain products have risen and continue to rise, customers are faced with two main issues:

  • When to spend their money (Are prices going to get higher? When/if will they come back down?)
  • What to spend their money on (Which of my alternatives are the right value?)

This entry will focus on the second of those two questions – what to spend. If consumers believe that prices are not coming back down or at least not coming down within their particular time frame, their focus shifts toward which alternatives represent the best value.

Therefore, rising prices doesn’t necessarily mean that consumers will not be spending money. It might mean that they will spend their money differently than they would have if prices were more stable.

For instance, consumers still need the basics – e.g., food, shelter, transportation – and even the not-entirely-basics like recreation. Still, consumers have choices within those categories.

There is the long-held view that consumers move along the value chain in times of economic uncertainty – perhaps from Macy’s to Kohl’s to Target and from Whole Foods to Kroger to Aldi to Family Dollar.

The questions businesses must ask then include:

  • What is the value alternative for my product or service?
  • For which product or service is mine a value alternative?
  • How can I position my product or service as the best value? (long life, reusable, etc.)

Opportunities, therefore, exist for products and services that are seen as a value compared to competitive alternatives. For instance, private labels are less expensive than comparable branded products, and investing in home recreation products which can be used repeatedly might be seen as a better value over one-time travel or experiential spending.

Freedonia analysts will continue to watch how inflation trends affect consumer spending, from delays to substitutions.

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    

DoorDash – Expanding From Restaurant Delivery into Logistics for Dine-In As Well

This week, DoorDash announced that it would buy table-side contactless ordering and payment technology firm Bbot. This is part of the company’s move into technology areas, particularly restaurant logistics.

DoorDash seems to plan subscriptions to restaurant logistics services from table-side ordering technology to online ordering and delivery. This allows restauranteurs to focus on their core competency, which is usually the food. It’s also a good avenue for DoorDash as well. First-party logistics for use by the restaurants should be a more stable and profitable business extension as it relies more on technology and less on the expensive labor, which is a challenge for its original online ordering and delivery business.

One question would be access to consumer's data. Unless there is some sort of firewall or agreement about data ownership, DoorDash would be accumulating a treasure trove of information about demographics and ordering habits/preferences coming from those doing their online ordering and delivery and customers using the tableside technology.

Some restaurants have been bothered by orders going directly through third-party delivery firms such as DoorDash, GrubHub, UberEats, etc., as those firms get the customers' contact info and buying habits that the restaurants would want for marketing. However, restaurants might be more inclined to share the data with DoorDash if they weren’t frozen out of seeing who the customers are and what they like to buy.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Foodservice Single-Use Packaging and Food Carryout & Delivery (update in progress) from our sister published Packaged Facts. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Food & Beverage      Packaging    

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