Board Converting News, November 9, 2020

Return To Normalcy (CONT’D FROM PAGE 24)

people’s hesitancy to travel, to go to entertainment facil- ities, and to do things with other people, to a certain de- gree they’re replacing such activities with buying goods.” The positive retail reports will come as a surprise to anyone who has encountered the long rows of shuttered storefronts in America’s cities and towns. Two reasons ac- count for the disparity. The first is the increasing purchase of merchandise through digital channels—a long-term trend that has only been exacerbated by the stay-at-home nature of the pandemic. The second is that consumers have become highly selective, abandoning many mer- chandise categories in favor of a select few that are ei- ther essential to living, or which enhance the enjoyment of pandemic-enforced leisure time. Both trends have merged to create a retail environment that favors some sectors and decimates others. Capital Investment Despite the strength of housing and retailing, the econ- omy will face headwinds in 2021. Not least among them is the sluggish state of capital investment. Corporate de- cision-makers, faced with uncertainty, are reacting in a predictable way: keeping their powder dry. By the end of 2020 total real fixed investment had fallen by 27 percent annualized, according to Moody’s Analytics. “In uncertain times, investors hold onto cash and delay investments,” says John Manzella, a consultant on global business and economic trends, Amherst, NY ( ).

As for construction of non-residential buildings, the bag is equally mixed. “Although office and retail construction will be soft in the near future, they account for less than one-fourth of private nonresidential construction,” says Conerly. “The big categories of power production, man- ufacturing, health care and warehouses should do fine in the transition to post-Covid business.” Strong Retailers Retailing tends to reflect and invigorate the nation’s economy, and this is a sector that has registered notable gains that promise to continue. “Our current 2021 forecast is for 6.2 percent growth in core retail sales,” says Scott Hoyt, Senior Director of Consumer Economics for Moody’s Analytics. That forecast represents a substantial improve- ment over 2020, when the 2.1% increase expected when numbers are finalized represented a deceleration from the 3.9 percent growth clocked in 2019. (Core retail sales ex- clude the volatile auto and gasoline segments.) The positive growth rate for retailers in 2020 has come about as consumers have rechanneled their purchasing away from services and toward merchandise. “While con- sumer spending has been hammered pretty badly, retail- ers have not been hit nearly as hard as service business- es,” says Hoyt. Moody’s forecasts a decline of 5.2 percent in services spending when 2020 numbers are in--a stark reversal from the 4.3 percent gain in 2019. “Because of


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November 9, 2020

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