Board Converting News, November 9, 2020

Return To Normalcy (CONT’D FROM PAGE 26)

Consumer Confidence Spending by consumers accounts for some 70 percent of economic activity and is arguably even more important than capital investment for the nation’s overall business health. Household spending, though, is driven by public psychology, and the most recent reports from Moody’s An- alytics show that the nation has a lot of catching up to do: By late 2020 consumer confidence was running as low as it was in March and April during the worst days of the pandemic. If uncertainty about the course of the pandemic and the availability of a reliable vaccine are reason enough for high anxiety, there’s a more immediate driver of consumer discontent: the noticeable drop in take home pay over the past year. “Wage and salary income, including the value of benefits, is forecast to decline 1.3 percent when 2020 numbers are finalized,” says Hoyt. Those numbers repre- sent a reversal in fortune from the 4.4 percent increase of 2019. (Wage and salary income figures exclude govern- ment payments such as the 2020 pandemic relief checks). Pandemic-related furloughs and business closings ac- counted for a major portion of wage declines. Moody’s expects the unemployment figure to come in around 8.5 percent when 2020 numbers are finally tallied. That’s a sharp increase from the robust 3.5 percent level consum- ers were enjoying as recently as last February. Consumers might improve their outlook if the unem- CONTINUED ON PAGE 30

“This undoubtedly puts downward pressure on economic growth. As a result, uncertainty has become the enemy of prosperity.” More robust investments in commercial buildings and machinery are not expected to arrive any time soon. “Low capacity utilization and still-high uncertainty will make ex- pansion decisions difficult, though the declining cost of corporate borrowing will provide some offset,” says Koro- peckyj. “Major segments of investment will be weak, with transportation equipment and structures especially hard- hit.” Structures investment is expected to decline by more than 12.3 percent in the months ahead, led by the collapse in retail and reduced demand for office space. Bank loan availability poses one barrier to a rapid re- turn of capital investment. “While interest rates are low, many companies have taken financial hits that can affect their ability to qualify for loans,” says Palisin. “With corpo- rate financials changed so drastically from the prior year, there is some tightening of access by lending institutions.” Moody’s identifies technology as one bright spot in an oth- erwise shadowed capital investment picture. Palisin con- curs with the observation, reporting an increase in spend- ing by his members to boost efficiencies. “The pandemic will probably accelerate the trend toward more automation and robotics,” he says. “Such technology will be needed to increase manufacturers’ resiliency.”

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November 9, 2020

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