With a tough year behind us, 2021 is expected to witness positive financial growth, while markets slowly and steadily revive. Reeling from the pandemic economies are now dealing with a global public debt projected to reach almost 100% of GDP, with fiscal action of close to 12 trillion USD being taken – according to the IMF’s fiscal monitor report.
With the US presidential elections having an undoubted global impact; as the new political party assumes full-fledged governance, new policies across industries, markets, and countries are impending. There is light at the end of the tunnel as the economy of this country slowly recovers. Chairman of Gamco Industries, investor Mario Gabelli, recently stated his positive outlook for the future of economic growth in the United States, attributing it to the long runway for automobiles, housing, and returns on commercial aviation spending.
With bright and hopeful prospects germinating on various fronts, we examine the up and emerging market trends and forecasts for 2021 along with the overall sentiment across industries in the United States.
The auto market sees positive growth this year with more people avoiding public transportation in wake of social distancing, safety, and hygiene protocols set in motion with the coronavirus. The demand for light vehicles in the US has seen exponential growth in the later months of 2020 after reaching a 50-year low in April – bottoming out at an annualized rate of 8.7 million USD.
Dealers have now adapted to the lockdown measures of the new normal, leveraging online marketing and sales. Used-vehicles have recently seen accelerated sales spurt across the US; new car sales are estimated to see a 3.5 million year-on-year decline. In May 2020, Moody’s forecasted US auto sales in 2020 to drop by 25%, but projected it to grow 16.2% in 2021 with automakers reopening North-American plants, predicting a slow but steady recovery. US forecasting specialist Daniel Manaenkov stated that new vehicle sales is expected to climb to 16.3 million units in 2021 with the growth outlook for the auto industry looking promising. With markets recovering, Technavio has released its “Automotive Alternator Slip Ring Market Research Report”, estimating growth in market size by 62.7 million USD between 2020-2024.
Retail & E-commerce:
Retail has undoubtedly been one of the fastest industries to adapt to the pandemic. 2020 has been a favorable year for e-commerce growth and 2021 is deemed to witness a positive growth curve as a majority of consumers grow comfortable with online shopping modes. US e-commerce sales is set to reach 794.5 billion USD, seeing a 32.4% year-on-year rise and expected to constitute 14.4% of all US retail spending this year and 19.2% by 2024.
With the US economy seeing a revival and employment rates slowly gaining pace, consumer purchasing power will also increase, leading to a rebound in retail operating profits. November 2020 saw a decline of total US retail sales by 0.8% with the virus resurge, and even as the festive season served as a saving grace for e-commerce and retail, 2021 hopes to bring more respite.
With buying patterns for food normalized and the reopening of restaurants, malls, and retail outlets, the US retail industry is expected to see an upward trajectory. Operating profit is expected to increase by at least 20% in 2021 with core retail sales forecasted to see a 6.2% growth in the coming months.
As of January 5, 2021, coronavirus cases surpassed 21.1 million, with over 357,000 deaths – a marked increase in December alone, owing to the holiday season and New Year celebrations. The healthcare industry is seeing substantial growth across the nation, more so due to the Affordable Care Act (ACA) that has opened access to an otherwise expensive industry, to the common American population. Clinics and hospitals are now hiring more providers to keep pace with the rise in new patients.
March 2020 saw negative ratings for the healthcare industry with the drastic surge in virus infections. Hospital capacities had exceeded their limit. The mortality rate shot up in the months following- with the public’s lack of affordability of hospital services. The 2021 sector outlook is looking up, however, with over 63% stable ratings for the US healthcare and pharmaceutical industries.
US healthcare spending is projected to grow at an annual average rate of 5.4% between 2019-2028, compared to 4.5% in 2016-2018. The US pharmaceutical market is slated to see at least a 7% growth this year. With the COVID-19 vaccine finally being formulated and made available ahead of schedule this year, even with the threat of new strains and virus mutations, there is hope for a healthier future and life resuming normalcy.
With the banking sector experiencing a decline, fears of recession and the recurrence of a great depression were anticipated back in May 2020. 2021, however, poses a stable outlook with a forecasted return to the economic growth of 4.5% after the contraction of GDP to 4.6% in 2020. The sector has held up better than expected with online banking enabling more e-commerce transactions. The increase in contactless transactions has further spurred new account openings and account balance maintenance across the US population.
Further, policy responses and unparalleled liquidity support from the Federal Reserve, along with fiscal stimulus in the form of Coronavirus Aid, Relief and Economic Securities Act (CARES) have aided in holding up bank fundamentals. However, the majority ratings outlook – almost 60% remains negative with uncertainties presented by new virus strains, questionable effectiveness of the vaccine, and renewed lockdowns.
There will be reduced consumer spending on personal and credit card loans, even as larger banks increase loan loss provisioning and allowance coverage. The total personal loan market recovery is not expected till 2023 with GlobalData forecasts seeing a decline in the total value of US personal loans by 7.7% in 2020. While value growth can be anticipated to return this year, the economy will continue to remain in recovery mode with full market recovery only expected by 2023. The domestic equity market has seen a considerable rise, reaching an all-time high in Q4, 2020. With benign inflation, low interest rates, and supportive fiscal and monetary policies, one can expect market volatility in the economic reopening.
COVID-19 has seen amplified demand and consumption for CPG, with the sector slated to witness sustained growth in 2021. An increase in the demand for essential goods is further driven by the rise of at-home consumption. Safety, sanitation, and hygiene concerns are increasing demand for packaged foods. The at-home consumer now indulges in self-care purchases, essentials like groceries, healthcare, clothing, food ingredients, and other e-commerce retail purchases to compensate for the lack of outdoor experiences.
The CPG sector has adapted well to the pandemic with enhanced online shopping experiences, improved digital platforms, technology applications revitalizing the supply chain, expanding last-mile delivery options, and focus on safety and customer-first transparency. The US CPG industry was expected to increase its digital ad spending by 5.2% – to 19.4 billion USD by the end of 2020.
With a second wave predicted in early 2021, there could be stockpiling of goods anticipating lockdowns, aiding a sector-wide growth. The CPG market size is expected to grow to 3.7 billion USD by 2025 at a compound annual growth rate (CAGR) of 21.7%. CPG companies strive to reinvent their products and marketing strategies, actively tracking dynamic consumer trends of healthy, conscious, and sustainable consumption among others.
With a projected 4.8 trillion USD global revenue for the tech industry in 2020, IDC predicts reaching 5 trillion USD in 2021 translating to a 4.2% growth. If the pattern continues, by 2024, the CAGR of the tech industry could hold at 5%. While the pandemic onset saw a global technological boom, lack of budget and declining stocks is posing a downward curve for the US tech industry.
Representing the largest tech market in the world – 33% of the total, the US approximates 1.6 trillion USD of the global share for 2021. The US tech industry is navigating uncertain waters after witnessing a 2.5% decline by the end of 2020 and foreseeing a -0.4% slowdown and no growth in 2021.
2020 saw better tech investments and growth than expected, but the trajectory for this year remains a blur. The Big Tech backlash with public threats by regulators is expected to continue into 2021. Companies for their part will keep making proactive changes to their business practices to settle quickly.
Manufacturing accounts for about 11.3% of the US economy and has previously been forecasted to increase by 1.9% by the ‘Manufacturers Alliance for Productivity and Innovation Foundation’- growing faster than the general economy due to increased capital investments and burgeoning exports. While the manufacturing sector saw a major decline last year with global supply chain disruptions, their recovery promises stability for the sector.
With sectors such as aviation and commercial real estate taking a hit during the pandemic, manufacturers of these parts have also been affected. The overall growth of the US manufacturing sector is recovering from an all-time low, varying across different industries. For instance, the ISM’s (Institute of Supply Management) survey indicates that fabricated metal products are seeing a decline while machinery, electrical and component manufacturers witness a positive uptick in demand and production. The ISM index of national factory activity increased to 59.3 in October 2020. An annualized rate of 33% expansion of the sector in the July-September period further served to indicate a healthy uptick and hopes for further growth and stability in 2021.
The recovery, however, might take longer to reach pre-pandemic levels of growth and expansion; Deloitte projections based on the Oxford Economic Model (OEM) anticipates a decline in the annual US manufacturing GDP growth levels, forecasting a steep decline of -5.4% for 2021. Nonetheless, pandemic-driven disruptions will fuel a more flexible and resilient industry that focuses on localized and sustainable productions, digital advancements, and increased workforce investment.
The real estate sector has a positive outlook. Plummeting inventory costs (34.3% drop from last year) and an all-time low in mortgage rates (the average 30-year fixed rate dropped to 2.95% by December 2020) further prompting growth.
Chief economist for the National Association of Realtors, Lawrence Yun, stated the demand for large- sized homes to have grown owing to the safety requirements of staying indoors along with increasing work-from-home commitments. Yun predicts a 9% rise in home sales with a 3% increase in prices, leading to a 6% year-over-year gain this year. 2021 is projected to be a positive year for growth in household sales, rent, and home prices. A report from the Federal Reserve Bank of New York mentioned that the median household is willing to increase their expenditure by 3.7% in 2021.
While 2020 witnessed a drastic GDP decline, 2021 is slated for an increase by 3.1%– with Q2 and Q3 forecasted to reach 5.6%, perhaps hopefully even bringing the US GDP back to its pre-pandemic levels. To gain a competitive edge, businesses across sectors will need a constant market pulse to stay proactive, agile, and confident of their next moves. Amidst the introduction of new vaccines, threats of new strain, and imminent lockdowns insights based on global industry-specific research will help enterprises identify gaps and whitespaces and develop strategic roadmaps better aligned to their business goals.
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