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.

Can More Open International Trade Ease the Impact of COVID-19?

Much of the economic impact of the COVID-19 coronavirus deals with its disruption of international trade. Global supply chains are intricately linked, expertly optimized, and – as a result – often inflexible in the face of disruption. These fragile international linkages, key to the modern economy, are the reason why most economists predict that the coronavirus will have a much larger negative impact than the SARS outbreak in 2003.

In an article, Bloomberg Economics looks at the flipside – how can international trade help ease the economic impacts of the coronavirus? Remedies such as reducing tariffs and increasing international coordination would help grease the wheels of trade and mitigate the downside to the virus. But in today’s atmosphere of divisive, confrontational politics, hoping for greater international cooperation and easing of tensions may be a tall order.

  Covid-19      Tariffs    

US Federal Reserve Makes an Early Rate Cut

On March 3, 2020, the US Federal Reserve cut its target interest rate by 0.50% to 1.00%-1.25%. The move was the first to occur outside the regularly scheduled policy meetings that take place every 6 weeks since the 2008 economic crisis. The Fed did not want to wait as concerns about the spread of the coronavirus in the US caused strong volatility in the US stock market. The move signals that the bank will take rapid, significant steps to counter effects of the virus on the economy. If it continues to spread, consumers and companies may limit gatherings and unnecessary interactions, which will reduce consumer activity as well as economic output in the markets they support.

Reduced interest rates could help many sectors. For instance, borrowing funds to buy a house, a car, or other large durable goods will be less expensive. In addition, companies will be able to obtain lower-cost loans to help them through a period of reduced economic activity or supply chain difficulties. However, the lower interest rates might hurt the banking industry, as commercial banks generate a significant portion of their revenues from interest on loans.

For more information on these sectors, see the relevant publications from Freedonia Focus Reports: Air Transport Services: United States, Commercial Banking: United States, Housing: United States, Motor Vehicles: United States, Recreation: United States, Restaurants & Foodservice: United States, and Water Transport Services: United States.

  Covid-19      Freedonia Focus    

Supply Disruptions in the Chemical Industry: China Is Coming Back Online, but What’s Next?

Chemical & Engineering News reports that chemical production in China is beginning to recover from the COVID-19 coronavirus. Many chemical plants that were closed in January and early February have reopened. 

However, most chemical plants are running at reduced capacity, and Western firms are still feeling pressure in their supply chains. The uncertainty mimics a similar situation that occurred in 2017 and 2018, when environmental pressures forced the extended shutdown of numerous plants in China, resulting in shortages and high prices for specialty chemicals such as silicones.

Even if China’s chemical industry is getting back to business, the spread of the virus outside of China is increasing worries that further disruptions could be on the horizon.

For more information, see Freedonia’s Global Silicones, Global Rubber Processing Chemicals, and Global Construction Chemicals reports.

  Chemicals      Covid-19      Plastics & Other Polymers    

3M & Others Expand Production of N95 Respirators & Related Masks

Surgical masks, exam masks, and N95 respirators are in high demand as ways to limit the spread of COVID-19, the novel coronavirus. However, supplies have been hampered by insufficient production capacity and manufacturing closures in areas that are seeing high incidence of the disease.

However, help is on the way. Businesses in China have already converted their operations to the production of masks. Additionally, key mask suppliers such as 3M are responding by having existing staff work additional shifts as they move from a 5-day week to a 7-day week at some plants, as well as by fast-tracking hiring processes and increasing automation where possible.

Still, the rising need for these items as the disease spreads is going to mean that such measures are unlikely to let up any time soon.

For more information, see Freedonia’s Global Medical Disposable Supplies and Disposable Medical Supplies in the US reports.

  Covid-19      Healthcare & Life Sciences      Textiles & Nonwovens    

Retail Stores Are Starting to See Runs on Emergency Supplies: Who Needs a Mask?

This past weekend, consumers in parts of the US started seeing empty shelves and a lack of stocks in key supplies. Even as the US Surgeon General is reminding people that they do not need a mask and that masks are not as effective as you hope, nervous consumers are willing to ignore that advice for just one more layer of real or perceived security against the COVID-19 novel coronavirus.

The trouble is China – which has seen many businesses close since COVID-19 appeared in December – is the source of nearly 20% of the world’s disposable medical supplies, including masks. Therefore, supplies are not likely to increase rapidly until the need for these products in China and abroad is reduced or domestic suppliers are able to ramp up production sufficiently.

In the meantime, consumers who still want to buy masks will compete for the remaining supplies with professionals – including first responders and medical personnel – who need them for their daily operations.  

For more information, see Freedonia’s Global Medical Disposable Supplies and Disposable Medical Supplies in the US reports.

  Covid-19      Healthcare & Life Sciences      Textiles & Nonwovens