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.

Why Lots of Things We Buy Are Getting More Expensive…

The global economy is seeing shortages and historically high prices for things such as lumber, computer chips, plastic resins, corrugated board/boxes, and chicken – all products that have ripple effects into larger markets such as home construction, vehicle manufacturing, packaged goods, e-commerce shipments, and foodservice... what is going on here?

While there are often industry-specific challenges, there are several factors in common across much of the economy:

  • Shipping issues – there are shortages of containers (or containers in the wrong places), lags in unloading at ports, and shortages of commercial truckers that are slowing road transport
  • Supply constraint
    • from facility shutdowns or slowdowns, whether due to severe weather (e.g., processors of plastic resins were shut down during the February storms in Texas and still haven't caught up) or COVID outbreaks or operational restrictions (e.g., chicken processors)
    • from an inability to ramp up production any faster as some were already operating at full capacity in 2020, and while major investments are planned or underway, there are supply bottle necks at the machinery production level too
  • Demand-side issues as industries saw sales gains that were unprecedented, sudden, and even sustained

While some of these conditions existed in 2020, there were a lot of segments of the economy where we still didn’t see price increases until recently. Why not? Some retailers and manufacturers have had a sort of “decency pressure” on them…they haven't wanted to be seen as taking advantage of a pandemic so they have refrained from raising prices in some cases. However, that period is likely over. With more people vaccinated and fewer people dying, there will be less of a feeling that rising prices indicates profiteering in a crisis. Suppliers increasingly see their price increases as justified and fully in line with their rising costs.

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.

  Automotive & Transport      Chemicals      Construction & Building Products      Consumer Goods      Covid-19      Food & Beverage      Industry Studies      Machinery & Equipment      Packaging      Plastics & Other Polymers    

What Tells You Things Are Heading Back to “Normal”?

Instacart recently released a blog entry talking about something they are calling “the Pudding Pack Index.” The company suggests that increased orders of classic lunchbox items like pudding packs, granola bars, and fruit snacks are solid indicators that the US economy is returning to normalcy – a sign that kids are going to school or camps, that families are going on vacations (particularly road trips), and parents are returning to their workplace.

Our economy is full of such informal modes of evaluation. For instance, a former FEMA director suggested the “Waffle House Index” – or the ability for local Waffle House restaurants to be operating – is a good indication of the severity of storm event.

So what other core indicators might we look at now that could portend a return to normal?

  • Vaccine Rates: That’s an obvious one…vaccinated people are more comfortable resuming their previous habits and can better do so safely, even if the adjustment may not be rapid due to newly formed habits or ongoing concerns about variants or unvaccinated family members
  • Brick & Mortar Store Traffic: Now, many people are likely to retain their online shopping out of convenience and new habits, but returns to in-person shopping indicate normalization
  • Office Occupancy Rates: The return – at least partially – of workers who shifted home during the pandemic would boost traffic at foodservice restaurants and aid the sagging commercial real estate industry
  • Miles Driven: Increases here would indicate more people commuting to work and more people traveling
  • Improvements in Retail Apparel Sales: Once we decide to set aside our pandemic athleisure and start buying fresh outfits for special events, evenings out, and professional looks, we’re planning for a life away from our couches and home offices

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.

  Automotive & Transport      Construction & Building Products      Consumer Goods      Covid-19      Food & Beverage      Packaging      Services      Textiles & Nonwovens    

Surging Demand Spurs Sawmill Owners to Increase Production Capacity

As noted frequently on this site, lumber demand has risen sharply during the pandemic, fueled by strong growth in new housing starts and increases in home improvement and repair activity, particularly among DIYers. Lumber prices have climbed to record heights as home builders, contractors, and homeowners have scrambled to obtain materials for a wide range of products. This shortage of lumber – and its high price – is a threat to the US economy as it climbs out of the pandemic, as delayed or canceled projects threaten thousands of construction-related jobs across the US.

Thus, it was welcome news when two leading North American lumber suppliers announced plans to expand production capacity at sites across the US.

  • Interfor announced plans to expand production capacity a sawmill in Perry, Georgia
  • West Fraser Timber announce plans to expand lumber production at five sawmills in the South (as well as two US OSB mills)

These planned capacity expansions will provide much needed relief to the US lumber market, expanding supplies and hopefully directing prices to historically more normal levels. Furthermore, as these mills ramp up lumber production, demand for the timber needed to make lumber will rise. This will in turn stimulate logging activity, which has remained sluggish due to low prices.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products and Consumer Goods areas. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Industry Groups Spar Over the Cause of High Lumber Prices

Lumber prices have remained high for several months, with supplies of lumber equally low. This is a special concern of home builders across the US. Shortages of lumber have affected the production of new homes, while climbing lumber prices threaten to make the residences that are completed unaffordable for many consumers. Considering that demand for homes – both newly built ones and existing residences – has never been higher, the lack of available lumber and its high cost when in supply has left all industry parties looking for solutions.

One idea floated by some is for the US to reverse the tariffs levied on Canadian-made softwood lumber. Because of these tariffs, many Canadian firms stopped selling lumber to the US, and those that did suffered sales declines as their lumber was now much more expensive.

Recently, the US Lumber Coalition – a group representing US producers of softwood lumber – put out a press release detailing what it thought were the causes of high homes prices, which included:

  • high labor costs
  • rising land prices
  • the overall increase in demand for all other wood-based building materials – not just lumber

The US Lumber Coalition reported that lumber was only a small part of the cost of building a new home, and that its members were doing their part to ameliorate the shortage of lumber by maximizing production. Furthermore, the US Lumber Coalition claimed that ending the tariffs on Canadian-made lumber would do little to reduce lumber prices, but would greatly affect US lumber producers, who would be hard-pressed to compete with Canadian suppliers.

In response, the National Association of Home Builders (NAHB) – whose members are among the largest consumers of lumber in the US – issued a press release that challenged many of the findings of the US Lumber Coalition, such as:

  • lumber and wood products play a much larger role in home building
  • sawmills did not ramp up production as rapidly as needed in response to surging lumber demand

The NAHB, in turn, called for the lifting of tariffs on Canadian lumber, claiming that the US does not have sufficient production capacity to meet its domestic market needs. Furthermore, by allowing more Canadian lumber into the US, not only would supplies increase, but costs would go down, making lumber – and new homes – more affordable.

Freedonia Group experts will continue to monitor the US lumber market and how lumber supplies and pricing continue to affect the overall US home building and construction industries.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products and Consumer Goods areas. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Home Remodeling Activity At High Level, Expected to Remain So Going Forward

Amidst all of the talk of high lumber prices, supply chain difficulties, and the challenge of finding skilled workers for many construction jobs, it is easy to forget that the US home remodeling market remains strong, as US consumers continue to invest in fixing and improving their residences. For instance, in the February-March edition of The Freedonia Group National Online Consumer Survey, 35% of respondents noted they were currently undertaking a home improvement project because of the coronavirus pandemic (aided, no doubt, by stimulus funds delivered this spring).

Even as it appears that the US is slowly turning the corner on the coronavirus pandemic, remodelers across the country report surging sales – and those looking to engage their services report long delays in scheduling the work. A pair of recent articles indicate that this surge in activity is expected to continue going forward.

The first reports that the Kitchen and Bath Market Index – an indicator of the confidence of the kitchen and bathroom remodeling industry – was at its highest recorded level in the first quarter of 2021. The Index, a survey of designers, contractors, manufacturers, and retailers, shows that demand for their services remains elevated. Homeowner interest in these projects remains high as consumers renovate their homes to meet changing conditions caused by the COVID-19 pandemic. From adding bathrooms to accommodate extra family members to remodeling kitchens to include space for a home office/classroom, homeowners are willing to invest in their homes – and kitchen and bathroom professionals are more than ready to do so (once they have the time).

The second reports that overall home remodeling activity is expected to post strong growth throughout the rest of 2021 and into 2022. While kitchen and bathroom activity will account for a significant share of this, other projects will also play a role. Such renovations as adding a deck or swimming pool, converting a little-used room into a home gym or office, or even just the decision to upgrade their home by repainting or installing a new floor are among those that will be undertaken by a homeowner. This, in turn, will drive demand for a wide range of building and construction materials, from cabinets to paint to flooring materials.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.