Faced with contrasting reactions to the COVID-19 virus resurgence by different states, the U.S. economy continues to gain momentum. Even with 21 states representing 45 percent of U.S. gross domestic product (GDP) in various degrees of lockdown, the remaining states are operating without restrictions. Despite this contradictory situation and the headwinds posed by the states in lockdown, the economy continues to rebound.
Key elements supporting economic growth:
- Stimulus spending by the federal government ($3.5 trillion) has provided consumers and businesses some financial respite from the economic lockdown, and more arrived in January.
- The Federal Reserve has maintained low interest rates and is providing significant liquidity.
- Existing home sales, working remotely, and stay-at-home lockdowns are helping fuel vigorous residential remodeling spending.
- New home construction remains close to traditional levels.
- Employment is growing, as is consumer spending.
- Energy costs remain positive.
- Government spending in the near-term will be a boost to growth.
- The COVID-19 vaccine should boost consumer confidence, revitalize the travel, amusement, and hospitality industries, and boost economic activity in general.
The following issues will restrain economic growth in the U.S. and pose a threat to the recovery continuing:
- Uncertainty as to the policies to be pursued by the Biden Administration.
- Coronavirus resurgence, if it spirals out of control, could trigger supply chain disruptions, unemployment, renewed restrictions, and a world-wide recession.
- The U.S. election in November presented a stark contrast between two economic philosophies, which, if progressives prevail, will change the U.S. economic direction.
- Corporate profits are weak due to China tariff costs and a weakened U.S. economy.
- Tariff negotiations could devolve into a major trade war.
- Consumer debt share of disposable personal income and federal debt are rising.
- The huge U.S. government deficit could have unintended consequences that threaten U.S. economic stability and interest rates.
Calculating the dollar value consumption percent change results year-to-date at September 30, 2020, indicates that all U.S. flooring type sales are being cannibalized by LVT at a faster rate than originally forecast. Also, the economy collapsed in Q2/2020 under the weight of unforeseen virus-related restrictions and lockdown, which constrained flooring sales.
Santo Torcivia is President of Market Insights LLC in Reading, Pennsylvania. He can be reached at 610.927.2299 or email@example.com.
This is a summary of the December 2020 Quarterly Market Monitor Report published by Market Insights LLC. NWFA members have exclusive access to the full report, which provides forecasts and analysis of economic, market, and industry conditions and trends affecting the North American flooring market. The report includes a historical and forecasted volume of dollar sales of total wood flooring (at mill sell price) per metro area and state. Separate reports are available for the United States and for Canada. The availability of the reports on a quarterly basis will provide NWFA members with current data that can help them develop business plans, prioritize inventory, and react to market conditions in a timely manner. NWFA members may download the full report by visiting nwfa.org.