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.

Coronavirus Concerns Causing Starbucks to Temporarily Eliminate Beverage Service in Reusable Cups

In January 2020, Starbucks announced a new set of sustainability goals through 2030, which included further movement from single-use to reusable packaging. This shift includes cups as the company has been both participating in the NextGen Cup Challenge and giving customers $0.10 discounts if they bring their own cup or request to use a reusable ceramic mug in-store.

However, Starbucks, which is headquartered in Seattle where a virus cluster has resulted in 10 reported deaths related to COVID-19 to date, announced on March 4 that it would be suspending the use of reusable cups as part of its efforts to respond to the public health crisis. This move is framed by Starbucks as temporary, and the reusable cups will be back when the outbreak dissipates.

The impact, although temporary, is not insignificant. This is a speedbump on the path toward getting Starbucks customers – and others – to change their habits, something that is needed for greater adoption of reusable cup policies.

Still, foodservice businesses are expected to increasingly consider more sustainable packaging options (e.g., fiber-based, recyclable, compostable, and reusable products) for cups, lids, and carryout containers in the coming years.

For more information see The Freedonia Group’s Foodservice Single-Use Products report.

  Covid-19      Packaging      Plastics & Other Polymers    

COVID-19 & the US Pet Industry: Initial Reports

Addressing the health of pets and their owners in relation to the novel coronavirus outbreak, the Centers for Disease Control and Prevention (CDC) recommends that those infected with COVID-19 avoid contact with pets and other animals. This position gained force today with news reports that the dog of an infected owner in Hong Kong is “now believed to be the first case of human-to-animal transmission.” 

Nonetheless, and even though COVID-19 “seems to have emerged from an animal source,” the CDC advises that there is no evidence that pets themselves can spread COVID-19 to humans – a point reiterated by the American Veterinary Medical Association (AVMA) in its coronavirus bulletin.

On the pet medications front, according to the FDA’s February 27, 2020, Coronavirus (COVID-19) Supply Chain Update, veterinary pharmaceuticals or pharma ingredients sourced from China “soon could lead to shortages.” 

On the pet food side, there have been reports of in-store signage attributing out-of-stocks to coronavirus-related shipment delays.

For pet products as for many consumer markets, supply chains often link to China. Any disruptions from shutdowns in China are likely to be amplified by pet owners stocking up against shortages. Challenges for the US pet industry may deepen unless suppliers in China return quickly to full capacity operations and supply chains are restored.

See the Packaged Facts website for more information from our sister publishing brand’s extensive coverage of the pet industry.

  Covid-19    

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