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.

US Automotive Industry & Supply Chains Temporarily Reshaped by COVID-19

US automobile manufacturers have quickly altered their operations due to COVID-19. Many firms adjusted to slumping new car sales by slowing down assembly lines or ceasing production altogether, while other manufacturers have worked to re-tool production to make ventilators and other needed medical equipment. This contraction of automobile production activity has affected hundreds of companies across the US.

Suppliers of automobile parts and components have been hard hit as orders for their products have dried up. Given that – in many cases – these suppliers rely on subcontractors with the parts needed to put together steering, axle, chassis, and the other assemblies, the shutdown of a single plant can ripple down to multiple other businesses.

Furthermore, this drop in orders will affect those companies that provide raw materials to the industry. Getting beyond the more obvious metals used to produce modern automobiles, such as steel and aluminum, a wide range of other inputs is also required, such as plastic resins, rubber (not only for tires but for acoustical and vibration control), composites (e.g., fiberglass and carbon fibers), coated fabrics (for upholstery, headlining, air bags, etc.), and glass.

Some of those materials – including plastics and coated fabrics – can be reposed into needed personal protective equipment and some plastics, gaskets, and other items will be used for ventilators. However, a prolonged shutdown of the nation’s automobile production capacity would still have dire effects cascading through to parts suppliers and firms that provide key raw materials.

For more information, see The Freedonia Group’s extensive catalog of off-the-shelf research. Each report includes analysis of competitive strategies, including joint ventures and merger and acquisition activity. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Covid-19    

Food Retail Sales Were Way Up In March…Yes, We All Stocked Up

The most recent release of monthly sales data from the US Census Bureau reported that unadjusted retail sales at food and beverage stores posted a 30% increase from February to March of 2020, and a 26% increase over comparable sales in March 2019.

This reflects a few main factors:

  • consumers stockpiling their pantries, freezers, and refrigerators ahead of stay-at-home orders, which then led many to limit their shopping trips
  • the shift in eating patterns as schools were closed and children who had previously eaten meals from school cafeterias began eating at home
  • the percentage of consumer food spending that has shifted from eating out to eating at home, as stay-at-home orders closed dine-in operations at restaurants and other foodservice outlets throughout the country

Expect April figures to remain above same-month 2019 patterns but likely not as high as in March 2020, which included a lot of panic buying and stockpiling that will have been reduced in April, when many stay-at-home orders had already taken hold. Still, dine-in operations remain closed and a large number of consumers are feeling economically uncertain or working at home, thus still limiting away-from-home food purchases.

Still, carryout and delivery foodservice spending will likely see a bump as consumers seek more meal variety or a break from cooking. The addition of more restaurants offering contact-free payments, carryout, or delivery will also boost sales.

For more information, see The Freedonia Group’s coverage of the packaging industry as well as our sister publisher Package Facts’ coverage of the food and beverage industry.

  Covid-19      Food & Beverage    

Honey-Do Lists & DIY Projects: Strong Retail Sales but Tightening Business Restrictions in Some Places

The most recent release of monthly sales data from the US Census Bureau reported that unadjusted retail sales at building material distributors and other related sales outlets posted a 25% increase from February to March of 2020 – despite the fact that many parts of the country were under shelter-in-place orders in the second half of March. Such sales were up 10% over comparable levels in March 2019.

While this increase can be partially attributed to better weather conditions as winter turned to spring and construction professionals stocking up on supplies in expectation of an increase in work as the weather improved, another factor may also have worked to boost sales: consumers undertaking long-delayed home improvement projects.

Many homeowners – either working from home or furloughed – suddenly found themselves with plenty of time on their hands and decided to take advantage of the situation by engaging in projects around the house. Others, casting a critical eye across their home, decided now was a good time to transform their residence into something completely different. Either way, home improvement centers, hardware stores, garden centers, and other retailers – to say nothing of the manufacturers of these items – have benefitted .

Sales have increased most for products that are best suited to DIY projects, particularly paint and wallpaper, flooring (most notably easier to install types such as luxury vinyl tile, laminate flooring, and decorative tile), garden supplies and tools, and outdoor furniture and grills. Cabinets, plumbing fixtures, drywall, and lumber appeal to customers who have the skill and tools to tackle larger or more complicated projects.

However, this spike in sales has led some government agencies to close all or part of such stores, since visiting crowds were getting too big to allow sufficient social distancing and protection for the staff. For instance, Michigan’s governor has tightened business restrictions so that large discount and home improvement stores that were otherwise labeled as “essential” and allowed to remain open during stay-at-home orders must close areas "dedicated to carpeting, flooring, furniture, garden centers, plant nurseries, or paint".

In order to keep from being subject to additional restrictions, retailers must institute policies and practices that will allow safe shopping and ensure appropriate distances between customers, including limiting the number of customers allowed at a time. Greater use of online ordering and curbside pick-up services will help.

For more information about these products and the US retail sales outlook, see the following Freedonia Group reports: Live Goods: Plants, Trees & Shrubbery, Cabinets, Countertops, Outdoor Furniture & Grills, Outdoor Kitchens, Global Flooring, Global Architectural Paint, and Global E-Commerce.

How Pandemic-Related Shifts in Our Eating & Shopping Habits Will Alter the Equipment Needed to Keep it Fresh

The coronavirus pandemic has drastically shifted how we purchase foods and beverages. For example, the most recent release of monthly sales data from the US Census Bureau reported that unadjusted retail sales at food and beverage stores posted a 30% increase from February to March of 2020 and a 26% increase over comparable sales in March 2019.

This shift is also altering the landscape of cold storage equipment:

  • A sharp decline in foodservice revenues has caused food distributors to readjust their business toward retailers, increasing the need for cold storage at distribution sites and in grocery stores.
  • A spike in e-commerce food sales, long thought to be the final frontier of traditional consumer shopping, is requiring additional investment in cold storage equipment to accommodate both direct-to-consumer shipped orders and in-store or curb-side pickups.

There is expected to be some amount of return to normal shopping habits when the pandemic passes and consumers are not restricted to certain shopping behaviors. Therefore, to some degree, this may be a short-lived bump in equipment sales to meet an immediate need.

However, this pandemic will also lead to some permanent changes in consumer behavior, reinforcing what had already been a trend toward the use of e-commerce food shopping or curb-side pickup. Therefore, in certain areas, there will need to be a strong continuation of investment in cold storage equipment – both in stores and at food warehouses – to meet sustained demand.

For more information, see The Freedonia Group’s coverage of the Commercial Refrigeration Equipment industry as well as our sister publisher Package Facts’ coverage of the food and beverage industry.


Outbreaks at Meat Processing Plants: Concerns About Worker Safety & Food Supplies

On Sunday April 12, Smithfield Foods announced its decision to close a major pork processing plant in Sioux Falls, South Dakota, after an outbreak of COVID-19 infections among at least 238 of the facility’s 3,700 employees. Other meat processors that have closed plants for the same reason include Cargill, JBS, and Tyson Foods, and more are likely to close as the infection spreads in the rural and farming area where these plants are most commonly located.

The concern isn’t for the safety of the food – as the FDA reports, "currently there is no evidence of food or food packaging being associated with transmission of COVID-19.”

The problem is the transmission of the virus among workers, many of whom work in close proximity to one another and often without sufficient personal protective equipment (PPE), particularly in light of nationwide shortages of these supplies, even for medical workers. These workers then spread the illness further into their communities.

The meat industry was already stressed by the sharp reduction in demand from the closure of the dine-in foodservice industry. Now, livestock farmers are finding the market for their animals among processors is being limited. Supplies of retail chains are likely to hampered as well; for instance, the closed Smithfield pork processing plant represents up to 5% of US pork production.

Access to more personal protective equipment, improved testing procedures, plans for disinfection and reporting if a worker tests positive, and consumer and worker confidence in plant disinfection procedures are among the measures that will get the plants open and running again. There will likely be consumer concern about the safety and ethics of big meat processing, which might propel some to shop from local butchers and direct-from-supplier shares of cows and pigs.

For more information, see the following reports from our sister published Packaged Facts – Global Meat & Poultry Trends, Eating Trends: Meat, Dairy, Vegetarian, and Vegan, and The Organic and Clean Label Food Shopper – as well as The Freedonia Group’s Meat, Poultry, & Seafood Packaging and Global Food Processing Machinery.

  Covid-19      Food & Beverage