National Electrical Contractors Association (NECA)
Matthew Kraus, Director, Communications
For electrical construction, the COVID-19 pandemic has taken its toll, with 2020 seeing a solid decrease in project starts and man-hours. However, early in the pandemic, as this work was deemed essential, the industry pressed on and was able to see recovery as the rest of the year pressed on. While numbers are not back to where they were, forecasts suggest construction will continue its recovery throughout 2021.
According to Dodge Data & Analytics, 2020 total construction activity fell an estimated 14% in 2020. In many ways, the COVID-19 pandemic exacerbated some anticipated challenges going into 2020, with nonresidential and commercial construction seeing the largest steps backward. However, residential construction has been a bright spot—specifically single-family residential. Reports have shown this sector climbing year-over-year in late 2020, and the belief is this growth will turn into a surge as the COVID-19 vaccine takes hold and additional stimulus money finds its way into the economy.
The Dodge Momentum Index (DMI), which tracks initial reports for nonresidential projects in the planning stage, hit a low in the summer of 2020, reflecting the impact of the pandemic on construction starts. The rest of the year saw the DMI begin to rise back up, with growth seen in some commercial areas as well as institutional projects. Other numbers have similarly shown a very sharp downturn early in the pandemic—much sharper than was seen in the 2008 recession—but continued stabilization over the course of 2020.
Construction employment, meanwhile, has also seen solid stabilization following the initial plunge. According to ConstructConnect, since bottoming out in April, residential construction employment has grown back 17%, nonresidential construction has grown back 9%, and total nonfarm construction has grown back 9.3%. While this is positive, all three sectors are multiple percentage points below where they were in February 2020 before the pandemic struck.
For ongoing projects, the pandemic also had a significant impact on productivity. An ELECTRI International report found that construction productivity was impacted by more than 20%, including about 8.9% of labor hours lost due to necessary pandemic mitigation activities. These include time delays due to temperature checks, less personnel on elevators and other social distancing measures. For vertical construction, the report estimated an average total of 62 minutes of lost productivity per day per employee’s 8-hour work period.
In summation, this is the consensus among all studies and forecasts that follow the construction industry: while numbers remain down overall, thanks to stimulus relief and being deemed essential, the industry has been able to build back up and set itself up for future growth as the end of the pandemic is finally on the horizon. Most forecasts suggest considerable (though deliberate and perhaps inconsistent) growth throughout 2021 followed by a potential surge in 2022.
Motor & Equipment Manufacturers Association
Bill Long, President & CEO
The automotive and commercial vehicle supplier industry experienced a significant rebound following the recent production and sales lows in the second quarter of 2020. Serving both the original equipment market and the aftermarket, vehicle suppliers demonstrated strong resilience throughout the year. This was vital given that the vehicle supplier industry—the largest manufacturing sector in the United States—was deemed essential to combat the pandemic. While ultimately dependent upon the availability of a vaccine for economic stability and growth in 2021, suppliers continue to absorb the costs of tariffs on inputs and raw materials, increasing the cost of U.S. production.
A quarterly member survey of automotive original equipment suppliers in Q4 2020 conveyed a significant increase in optimism for 2021, as compared to the Q3 survey. Even with this increased outlook for 2021, the 6-month rolling average falls below net-optimism levels.
Although North American new vehicle production improved materially after Q2 2020, it is still on pace to decline by over 3 million vehicles, or more than 20 percent for 2020. In 2021, output is forecast to rebound by nearly 3 million units, or over 22 percent, to nearly 16 million units. Even with this robust volume recovery, OE suppliers continue to face persistent headwinds from a tight labor market, supply chain disruptions and economic and political uncertainty.
At the start of 2020, suppliers expected strong sales of North American content-rich vehicles and light trucks to continue. During the COVID-19 shutdown of vehicle production plants, OE suppliers faced liquidity challenges while maintaining the ability to restart when the shutdowns were lifted. As health and safety protocols were established and manufacturing resumed, the sector faced additional challenges in ramping up to capacity levels to fill demand, as vehicle manufacturers had drawn down inventory levels while selling vehicles during the shutdowns.
The year ahead continues to present a high level of uncertainty for the industry relative to the speed of vaccine distribution, tariffs and trade policy and regulations governing the adoption of new vehicle technology.
The automotive aftermarket is expected to be stronger in the first two quarters of 2021, as compared to the overall weak performance of the sector in 2020. The average age in the U.S. of a light-duty vehicle (passenger car or light truck) is 12 years and continues to grow, indicating more opportunities for maintenance and repair, as well as sales of new and remanufactured parts. However, vehicle miles traveled (VMT)—another indicator of the need for maintenance and repair—decreased by approximately 12 percent in 2020 and may continue to decline in 2021. This could present significant near-term challenges for parts suppliers.
Federal stimulus funding in the spring of 2020 was crucial, allowing individual vehicle owners to spend more to service their vehicles. This helped the automotive aftermarket avoid large sales declines; additional stimulus funding could provide a similar effect.
Ned Monroe, President & CEO
North American PVC had a strong year of surging demand, as new homes were built, and existing homeowners spent big on home improvement projects. Construction-related uses, including PVC pipe, account for around 60 percent of annual PVC sales in the U.S. and Canada.
Even amid a pandemic, U.S. housing starts through October were on pace to reach almost 1.4 million for the year. That rate would be up about 0.5 percent vs. 2019 and up almost 5 percent vs. 2018. Housing starts were at an annual rate of more than 1.5 million in September and October, a very high rate for that late in the year. The high late-year activity may be compensating for an April rate that was under 1.1 million during COVID-19 shutdowns. North American PVC supplies could be boosted in 2021 by bottlenecks that will add at least 600 million pounds of capacity.
American Iron and Steel Institute
Timothy Gill, Chief Economist
The steel industry was severely impacted during the initial stage of the COVID-19 pandemic in the United States last spring. Capacity utilization in the raw steelmaking segment of the industry fell almost 30 percentage points between the middle of March and the beginning of May— from a reasonably healthy rate of approximately 80 percent to just over 50 percent. Raw steel production declined nearly 40 percent in volume over that time period.
Since early May, the steel industry in the United States has experienced generally steady improvement, but activity remains well below pre-pandemic levels by many metrics. Capacity utilization has trended upward, measuring more than 70 percent in late December, while weekly production has increased to approximately 85 percent as of mid-March’s level.
Steel demand, measured by apparent steel use, increased 12 percent between April and October, offsetting about 36 percent of the volume decline recorded between March and April alone. Based on data for the first ten months of 2020, steel demand was 19 percent lower than during the same period in 2019.
The increase in demand over the last several months has been due in large part to a rapid recovery in durables goods manufacturing in general, and automobile production in particular. We expect that the positive trend of the last several months will carry into the new year, and project demand growth of 5 to 6 percent in 2021. Among major steel consuming sectors, we expect durable manufactured goods like vehicles to continue to support demand but anticipate headwinds from the nonresidential construction sector. A substantial infrastructure spending package would boost steel demand as well as provide substantial productivity enhancing benefits for the economy over the long-term.
Although the domestic steel industry is encouraged by recent improvements in steel demand, it remains very concerned about burgeoning global steelmaking overcapacity and the potential for renewed surges of unfairly traded imports into the United States if steel tariffs and quotas are lifted or weakened. Previous episodes of global economic crisis have been followed by steel import crises in the United States as government subsidized foreign steel industries exported their excess production to the open U.S. market when demand in other markets dropped.
Plastics Industry Association
Perc Pineda, PhD, Chief Economist
The plastics industry remains on a growth path despite the setbacks from the COVID-19 pandemic. The global pandemic adversely impacted the manufacturing sector, which is the main market of the plastics industry, particularly in the second quarter of last year.
The manufacturing slowdown had an uneven effect on the plastics industry—plastics demand in some industries outpaced other sectors. Plastics materials and products are critical in healthcare — from medical equipment and supplies to personal protective equipment (PPE) for healthcare workers. Demand for plastics in the health care sector is stable. The prevalence of plastics materials, packaging, and products in consumer essentials—including the increase in the use of electronics as more workers telework and students attend online classes—also sustained plastics demand.
The quicker turnaround in other key plastics end-markets such as automotive and building and construction prevented an extended slump in the plastics industry as the economy slowed. Of the approximately 30,000 parts in an automobile, 1/3 are plastic. With auto and light truck assemblies virtually at a standstill in April from a year ago, the outlook for plastics in the automotive space looked dire. However, economic conditions started improving thereafter. In July, the industrial production in motor vehicles and parts exceeded the pre-COVID-19 level. The demand for plastics in the automotive sector turned around in the second half of 2020 and is currently projected to remain stable.
The decrease in construction supplies manufacturing in April also caused pessimism for plastics in building and construction space. Judging from the performance of the housing market, however, with new single-family home sales increasing since May, demand for plastics in building and construction, particularly in residential has been less of a concern.
Although the value of shipments of plastics products is still below its pre-pandemic level, it has been increasing since May, and growth is expected to continue. The production of plastics, both materials and resin, and plastics products, has been on the rise and is projected to continue barring another shutdown of the U.S. economy. There is room for growth in the plastics industry to meet increasing demand. Capacity utilization is still below the pre-COVID-19 level. With 79% of plastic products used in some sort of personal consumption, the current state and the near-term outlook of the plastics industry remains positive.
The post-pandemic period cannot possibly come fast enough for everyone. Still, there will be residual effects of the pandemic. While the plastics industry is positioned for growth next year, it needs to be mindful that the economy is still to reopen fully. This means business investment and consumer spending next year will still be constrained until this health crisis is fully resolved and the economy is on a solid footing. Policy and regulatory uncertainties this year could impact the plastics industry’s demand-supply dynamics, which could require tactical strategies from companies in the plastics industry supply chain to maximize revenue.
Consumer Brands Association
Katie Denis, Vice President, Research and Industry Narrative
The pandemic upended the consumer packaged goods (CPG) industry. In a matter of days, lockdowns kept Americans at home and created a vital need for the industry’s products — from toilet paper and disinfecting wipes to flour and beverages. Consumer demand skyrocketed. In the spring 2020 peak, sales of CPG products were up 21%; even after the initial panic buying subsided, sales have been steadily up around 10% each month since.
CPG products have never been more visible or vital as they have in the last eight months. As panic buying swept the country in March and April and shelves were left bare, we found ourselves with what could have been a crisis. But instead, the attention garnered by shortages or even fears of shortages made clear just how consequential the industry is.
The shock to the supply chain forced the industry to learn and adapt to skyrocketing consumer demand by changing the way it did business in a matter of weeks. While the increase in sales has left CPG healthy through what has been a difficult time for many, it also required significant investment to maintain production and keep employees safe and working.
CPG companies reported investing in contracts with external manufacturers to increase production, changing lines to meet at-home consumption needs, ensuring essential employees were protected and safe as they continued to work through the pandemic and allowing for overtime pay, bonuses and other benefits for essential workers. That is just a snapshot of how companies responded. Most companies expect the level of investment they made in 2020 to continue into 2021.
The next 4-6 months will be telling. At the end of 2020, we saw a return of retailer limits on high-demand CPG products that, while a responsible step by stores, resuscitated last spring’s fears of shortages and empty shelves. As we weather the winter and what is expected to be a “darkest before the dawn” moment with COVID-19 cases, the industry is in a fundamentally different place than last March, better prepared to meet cycles of buying that could push sales above their pandemic norms.
In the months after the U.S. emerges from COVID-19, we expect to see sales dip from their pandemic highs, though still stay slightly above pre-pandemic levels as Americans slowly resume their regular activities. We anticipate a reticence to go to crowded places that will continue to drive higher at-home consumption until Americans feel confident again.
It should be noted that the ability of the industry to adapt quickly was supported by flexibility and partnership in government. From easing truck weight requirements to ship more critical goods to expediting the registration process for disinfecting products, to name a few, there have been many lessons. It would be illogical to default to the old way of doing business as the crisis fades. Government should be nimble, building on the experience of the last 10 months — and like industry, should resist returning to its old ways.