Inside the American Rescue Plan
President Biden signed a massive $1.9 trillion stimulus package into law in mid-March. The bill provides direct payments of up to $1,400 to qualifying Americans. It also extends unemployment benefits, gives aid to ailing businesses like airlines, provides funding to speed up vaccinations and reopen schools, and gives most parents a tax credit of up to $300 per child, per month.
That means households should receive around another $700 billion over the next six months which will lead to another boom in consumer spending and add to already elevated levels of household savings. Economists estimate about 40% of the roughly $1.9 trillion package will be personal income.
The package also includes an extension of the pandemic unemployment programs and an additional $300/week in jobless benefits through September, which Wells Fargo estimates will add up to about $170 billion. Enhanced tax credits were also included in the package, which should boost income in the latter half of this year.
Research shows that one-time payments lead to an increase in consumer spending more quickly than an increase in income, as many people use the money to pay down debt or pay for something they’ve been putting off. Warmer weather, increasing vaccinations and fewer cases of CV19 will all combine to further loosen the purse strings. In addition, many consumers dramatically increased their savings during the pandemic and will soon be able to spend them on travel, entertainment, dining out and other services that were off-limits in many states during the worst of the pandemic.
Data caused Wells Fargo to project a rapid rebound in consumer spending this year, with total personal consumption expenditures (PCE) on track to grow 7.5% this year as a whole, with back-to-back double-digit percentage gains in PCE in the second and third quarters. If this forecast proves accurate, it will be the biggest six-month spending surge in at least 70 years.
President Biden Orders Supply Chain Review
President Biden signed an executive order intended to boost manufacturing jobs by strengthening the US supply chains for advanced batteries, pharmaceuticals, critical minerals and semiconductors. The US has become increasingly dependent on imports of these goods, which the administration has deemed a security and economic risk. The 100-day review is being done in hopes of increasing domestic production. However, the administration is also looking at working with international partners to ensure a stable and reliable supply chain. According to the Bureau of Labor Statistics (BLS), today there are 12.2 million manufacturing jobs compared to 17 million in 2000. The pandemic revealed the fragility of many vital supply chains. There were initial shortages of many goods, including vital PPE, and now automakers are dealing with a shortage of computer chips, which is taking a big bite out of profits and cutting production by more than a million vehicles.
Cordless Tool Growth
Forbes Asia did a feature on TTI that said that the cordless tool industry overall has plenty of room to grow. Chicago-based research firm Arizton Advisory and Intelligence found that cordless tools now account for 56% of the $24 billion global power tools market and that percentage should keep growing until at least 2025. Together, Bosch, SB&D and TTI controlled about 40% of the market in 2019. Forbes said in a recent report U.S. Bancorp (USB) found that TTI uses in-house, proprietary software in their batteries, while competitors rely on outside software or purchase battery packs from third party suppliers. USB also noted that high-performance brushless motors deliver higher power and durability.
Walmart Takes on Amazon Advertising
Walmart plans to expand their advertising business, adding space for ads in US stores and sharing their enormous bank of shopper data with brands as part of their plan to challenge Amazon as a media powerhouse. Walmart plans to grow their ad business to $10 billion over the next five years. Reuters reported that Walmart’s ad revenues for 2020 were estimated at close to $1 billion. In 2019 Walmart cut ties with their external advertising partner and took the business in house as Walmart Media Group, now renamed Walmart Connect. Walmart plans to build a new advertising platform in partnership with ad technology company Trade Desk that will allow brands to use Walmart’s shopper data to make ads more effective, even on websites and apps that Walmart does not own. Advertisers can monitor sales inside Walmart stores in real time and adjust ad campaigns as needed. Walmart will sell ads on more than 170,000 screens inside more than 4,500 US stores, including on TVs and screens of self-checkout kiosks.
Shoppers Face CV19 Delays; Retailers Deal with Bottlenecks
Categories from building supplies and lumber to electronics, vehicles and even wine are experiencing both production and shipping delays, causing out of stocks and shortages. Some factories in the US and abroad are still shuttered and many others are running at partial capacity, due to social distancing and workers out with CV19. Containers for overseas shipments are hard to find; containers are piling up at ports because there aren’t enough workers to unload and move them. Congestion has increased the amount of time it takes truckers to drop off or pick up containers. Many large retailers, including Walmart, are paying premiums for manufacturers to speed deliveries by trucking products directly to stores rather than distribution centers. Since stores are now fulfilling local ecommerce orders, this setup could be the beginning of a new delivery model that extends well beyond the pandemic. Even the rollout of CV19 vaccines is playing a role, as vaccines take up shipping capacity across many channels. Over December and January shortages and bottlenecks developed that had not been previously seen. In addition, all major businesses in China and Taiwan completely shut down for at least 7 days for Chinese New Year, which was the last week in January this year. Some factories shut down for up to 3 weeks because employees are traveling to and from hometowns that can be up to 1,200 miles away. Demand for goods has shifted to electronics, technology and home improvement products faster than supply has been able to keep up with. Americans aren’t going to offices, but they are buying a lot more athleisure and athletic wear, and “things that look good on Zoom.”
Retailers Try to Reduce Returns.
The shopping shift to buying everything online has resulted in a predictable rise in return rates. The number of ecommerce packages returned in 2020 rose 70% from 2019, despite several retailers using algorithms that allowed some customers to keep unwanted items and still get a refund. For a typical retailer, every $1 million reduction in returns can translate into $500,000 added to the bottom line, according to Newmine, which makes software that helps retailers understand the reasons for returns. Retailers are looking for innovative new ways to duplicate some of the benefits of shopping in a store, such as offering virtual “try-ons,” video and online demos of products and scenarios that allow customers to see what something would look like in their home.
Women in the Workforce Victims of the Pandemic
Prior to the pandemic, nearly 3 in 4 US moms were in the workforce. In 2019, 72% of all US women with children under 18 were working or looking for work, according to the Bureau of Labor Statistics (BLS); in 64% of families with two parents in a household, both were employed. When schools shifted to distance learning, something had to give. Only about 43% of all workers are able to telework; the vast majority of these are college educated. Today approximately 2.5 million women have dropped out of the workforce. Many households with spouses who were not able to work from home had to choose who would stay home and try and get the kids through virtual learning and who would go to work.
What Price Online Reviews?
Tech Radar reports that a recent audit of online reviews revealed that fake reviews can be purchased online in bulk. Several businesses have more than 700,000 “product reviewers” working for them. These individuals typically receive small payments, discounted products or other incentives for placing positive reviews. There is evidence that many of the businesses realize that Amazon, in particular, is attempting to weed them out and block their influence and offer advice on how to write reviews that don’t trigger Amazon’s algorithmic wrath. Amazon regularly removes fraudulent reviews, but it is practically impossible to vet every review.
International Debate over Taxing Tech Companies
There’s an international debate going on over how to tax US tech companies like Google, Amazon and Facebook, with several countries imposing taxes the US considers discriminatory, creating a series of trade disputes. Digital taxes are the latest measure threatening to trigger trade wars. The talks are basically centered around how to allocate some of a company’s revenue to the country where services are used so that the government there can benefit from taxes. In late January, finance officials from 137 countries resumed negotiations via teleconference; reportedly more than 40 countries are considering or planning unilateral digital taxes. The Paris-based Organization for Economic Cooperation and Development (OECD) says that if they do, it will create a trade war.
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