January '21

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rv-pro.com January 2021 • RV PRO • 67 says. The comparable 2019 figure was a pos- itive 3.8 percent. Median prices for existing homes also are increasing at a healthy rate, expected to top 7.6 percent when 2020 figures are finally tallied, which would surpass the 5 percent increase of the previous year. One key reason: Tight supply. "Housing has been a seller's market with low inventory levels as homeowners have been reluctant to offer their residences up for sale for fear of contracting the coronavirus," says Koropeckyj. Despite its recent success, the housing industry faces its own headwinds. "We expect prices to fall by 0.3 percent in 2021 as foreclosures mount due to an unwinding of forbearance measures by the federal government and private lenders," Koropeckyj says. "According to the latest Senior Loan Officer Opinion Survey, banks have tightened standards across all sorts of mortgage products." Solid Prospects for 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 per- cent growth in core retail sales," says Scott Hoyt, senior director of consumer economics for Moody's Analytics. That forecast represents a substantial improvement over 2020, when the 2.6 per- cent increase expected when numbers are finalized represented a deceleration from the 3.9 percent growth clocked in 2019. (Core retail sales exclude the volatile auto and gas- oline 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 consumer spending has been hammered pretty badly, retailers have not been hit nearly as hard as service businesses," 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 people's hesitancy to travel, to go to entertainment facilities, and to do things with other people, to a certain degree they're replacing such activities with buying goods," Hoyt says. Capital Investment Slows Despite the strength of housing and retailing, the economy will face head- winds in 2021. Not least among them is the sluggish state of capital investment, experts say. Corporate decision-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 who is based Amherst, N.Y. "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, according to Koropeckyj. "Low-capacity utilization and still-high uncertainty will make expansion decisions difficult, though the declining cost of cor- porate borrowing will provide some offset," she adds. "Major segments of investment will be weak, with transportation equipment and structures especially hard-hit." Structures investment is expected to decline by more than 20 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 return 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 corporate 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 otherwise shadowed capital investment picture. Palisin con- curs with the observation, reporting an increase in spending by his members to boost efficiencies. "The pandemic will probably accel- erate the trend toward more automation and robotics," he says. "Such technology will be needed to increase manufacturers' resiliency." Meet the Experts Bill Conerly is the principal of Oregon- based Bill Conerly Consulting, an expert on economic forecasting. Scott Hoyt is the senior director of consumer economics for Moody's Analytics, offering data, analytics and insights. Sophia Koropeckyj is the managing director of Industry Economics at Moody's Analytics, offering data, analytics and insights. John Manzella is a consultant on global business and economic trends who is based Amherst, N.Y. Tom Palisin is the executive director of The Manufacturers' Association, a regional employers' group representing more than 370 companies.

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