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.

E-Commerce & Softening Lean Inventory Patterns Drive Need for Warehouse Space

Supply chains are changing as consumers increase the amount of shopping they do via e-commerce and more of food and supplies are being distributed through consumer – rather than commercial­ – channels as people spend more time in offices and other commercial spaces. Additionally, there is more of a consumer appetite for having stocks of goods, thus requiring suppliers to loosen their lean inventory programs.

As this Wall Street Journal article indicates, the sudden changes in the buying habits of US consumers for a handful of goods has caused demand for warehouse space to increase.

This need for millions of square feet of additional warehouse space is expected to boost demand for a wide range of building and construction materials, key among them:

  • metal roofing, siding, and wall panels
  • other low-slope roofing products and such roofing accessories as drains and liquid-applied roof coatings
  • cement and concrete used to make subfloors, flooring, and such areas as loading docks
  • insulation – especially those materials required to maintain temperatures in structures designed to store frozen and refrigerated items
  • overhead doors
  • commercial-grade HVAC systems
  • material handling equipment, including racks, conveyors, and storage and retrieval systems
  • safety equipment and burglar alarms

Furthermore, the nation’s building contractors and construction professionals would welcome a surge of warehouse construction activity. While construction has been deemed essential in most states, many firms expect at least a short-term drop in operations as home and business owners react to challenging economic conditions by delaying – if not canceling altogether – construction projects such as major home improvements or key renovations. Builders and contractors will be more than ready to assume the task of quickly erecting warehouses needed for storing such essentials as food and toilet paper.

For more information about the products listed above, see the following reports from The Freedonia Group: Low-Slope Roofing, Roofing, Roofing Accessories, Global Roofing, Global Cement, Global Cement & Concrete Additives, Insulation in the US, HVAC Equipment, Global HVAC Equipment, Garage & Overhead Doors, Windows & Doors, Global Material Handling Equipment, and Safety & Security Alarms, as well as Global E-Commerce and Packaged Facts’ Global Food E-Commerce.

McDonald’s Reduces Restaurant Remodeling: COVID-19 Pandemic Reverberates to Commercial Construction Market

The recent announcement that McDonald’s would – as part of a company-wide retrenchment program – remodel fewer of its restaurants going forward is yet another adverse event for the US construction industry to weather. While there has a been a significant level of concern regarding the effect of the coronavirus pandemic on the housing market, the commercial construction industry will also be affected by COVID-19.

While a significant part of McDonald’s renovation plans for its restaurants were technological upgrades to more quickly process food orders and offer enhanced menu displays, every store renovation project also requires the use of a wide range of building materials, such as:

  • lumber and plastic components needed to make store furniture, kiosks, and related fixtures
  • decorative laminate surfacing to provide durable yet attractive wall and counter surfaces
  • countertops with integrated charging ports for personal electronic devices
  • new kitchen equipment, such as cooktops, refrigerators and freezers, and fryers
  • upgraded plumbing fixtures and fittings and such related products as grease traps

It is anticipated that other businesses will delay, if not cancel altogether, large-scale renovation going forward as companies look to reduce expenses. Other businesses that require franchisees or other operators to regularly engage in regular renovations to modernize their appearance include restaurants, hotels, retail stores, banks, and senior living facilities.

For more information about the US commercial construction industry, see The Freedonia Group’s coverage of the Building and Construction industry, and for more information on the prospects of these key industries see the following reports: Restaurants & Foodservice, Elder Care Services, and Commercial Banking.

Food Industry: Insufficient Workers With Immigration Limitations

Even before the coronavirus pandemic sharply curtained legal border crossings for seasonal workers, farmers were concerned that they would not have enough workers to plant and harvest crops.

Most farm work – particularly of delicate crops such as strawberries – is still very labor intensive, relying on a stream of seasonal worker, much of which comes from Mexico and other Latin American countries. Even where innovation has made greater automation possible, it is not an option for farmers who do not have the margins, particularly in this economic climate, to afford major investments.

If food is not planted in sufficient amounts to cover the market’s needs, food prices for consumers will rise. If the food cannot be harvested in a timely manner or some is lost to climate or weather conditions, there will be additional losses driving prices up even further.

Therefore, the need for adequate workers in the farming industry will have long-running impacts. Immigration regulations will need to be loose enough to cover for the lack of domestic workers in this area, and coronavirus containment procedures will need to be in place to prevent outbreaks among the migrant worker population, many of whom live in cramped temporary housing where social distancing is not possible and sanitation conditions are typically not optimal.

Current efforts to increase processing of H-2A temporary guest worker visas will help as it is something that many growers have been asking for. The suggestion from the Trump administration to reduce wages for foreign guest farm workers is more controversial, however, and has been met with resistance from immigrant and labor advocates as well as advocates of immigration restriction.

For more information, see our sister publisher Packaged Facts’ coverage of the food industry. Relevant information from The Freedonia Group includes our Global Food Processing Machinery report, which also includes COVID-19 market impact analysis. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Covid-19      Food & Beverage    

Food Industry: Transportation & Logistics Challenges in the Supply Chain

What if there are not enough truckers to bring crops to processors or stores?

What if there are not enough commercial flights (a key transport channel for perishable items) running from South America?

What if border crossings are limited, and the movement of produce and other perishables from fields outside of the US slows?

These are some of the supply chain concerns that keep food retailers and food processors awake at night. Logistics are an increasing concern as the coronavirus pandemic moves around the world.

Regulatory solutions have included dedicated lanes for movement through border crossings and relaxed driver hour limitations for those carrying essential products. However, driver losses due to illnesses or quarantine will be tough to overcome since the commercial driver cohort includes a lot of older workers and new commercial drivers cannot be trained overnight.

Airborne freight shipping will likely remain costly while there are fewer commercial flights in operation worldwide. Shipments of goods often ride in the cargo holds of passenger flights, but those are in limited supply now as travel is largely restricted to essential movement. This will limit imports and possibly product selection and will likely result in food price increases.

For more information, see our sister publisher Packaged Facts’ coverage of the Food industry, including Global Food E-Commerce. Relevant information from The Freedonia Group includes such reports as Global Bulk Packaging, US Rigid Bulk Packaging, Global Commercial Refrigeration, US Commercial Refrigeration, and Global Pallets, as well as Global Food Processing Machinery, which also includes COVID-19 market impact analysis. Additional information from Freedonia Focus is available in these reports: Freight by Truck, Air Transport Services, and Water Transport Services. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Covid-19      Food & Beverage    

Food Industry: Waste & the Supply Chain – Surplus & Shortage at the Same Time

Food waste – considered a leading environmental problem even before the coronavirus pandemic – has become an even bigger problem in recent days. Raw milk is being dumped and produce is rotting in the fields, all while many grocery stores have limited supplies and have instituted limitations on how many containers of milk consumers may buy per trip.

What’s the problem? A large part of the food supply chain is oriented around the foodservice industry – restaurants, school cafeterias, and other locations that are suddenly seeing sharply limited need in light of school closures and stay-at-home policies that have temporarily barred on-site restaurant dining.

Important government support measures would include:

  • government purchases to redirect supply to food pantries and school meal distribution programs
  • loans to enable food processors to redirect their operations to retail products
  • support for farmers who have to dump excess product because limiting output during the pandemic is not possible without leaving the food supply vulnerable to insufficient production when eating trends normalize

One private sector response, which provides more work for underemployed foodservice staffers, is selling groceries through foodservice outlets. Firms such as Panera Bread and Subway have started to offer take-home groceries in addition to prepared food.

Suppliers, processors, and retailers will all need to remain flexible, including shifting packaging purchases from bulk and large-scale containers to smaller containers needed for individual and family purchases at the retail level. This will require packaging companies to shift their own production  operations  to make enough smaller packaging options available.

Another kink in the shift from foodservice operations to more retail sales is that retailers are struggling to keep up with demand at their warehouses and in stores. In an attempt to work through a solution of labor needs, Sysco (a leading supplier to the foodservice industry) made a deal with Kroger (a major retail grocer) to allow its furloughed workers to temporarily work at Kroger distribution centers.  

For more information, see our sister publisher Packaged Facts’ coverage of the Food industry, including The Organic and Clean Label Food Shopper, Affluent Food Shoppers, Global Food E-Commerce. Relevant information from The Freedonia Group includes our influential coverage of the Packaging industry, which encompasses reports on Global Bulk Packaging and US Rigid Bulk Packaging, as well as the Meat, Poultry & Seafood Packaging report, which includes a new addendum with COVID-19 market impact analysis and an estimated market size for year 2020. Capital goods analysis is found in Global Food Processing Machinery, which also includes COVID-19 market impact analysis. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Covid-19      Food & Beverage