David S. McLaren is the managing partner of McLaren & Associates CPAs, LLC in Shrewsbury. Reach him at Dave@dmclarencpa.com.
Updated: December 21, 2020
Economic Forecast 2021
Who will thrive in 2021?
By David S. McLaren
As we all know, our local economy has taken a major hit from the pandemic. This is the worst impact in my lifetime; but there is good news ahead.
Gross domestic product is expected to grow at more than 4% next year. Social distancing measures and government required shutdowns dampened spending as fear spread. As restrictions are lifted, I expect consumer spending will increase. As more people get their jobs back, this will improve our local economy. With the outlook of a vaccine in the coming months, there is a light at the end of this horrible tunnel.
People have cut their spending for numerous reasons, but the two main reasons were loss of employment and fear of what was to come. Fear and uncertainty have a major impact on our decision making. If you do not know what is to come, you will most likely postpone any major purchases.
Many industries were hard hit while other industries took off overnight. Who would have thought toilet paper, hand sanitizer and cleaning supplies would have been such a necessity?
Other businesses' success split based on their reactions. Clients that are direct competitors with each other have polar opposite results. One business filing bankruptcy after decades in business, while their competitor is having a record year. The secret to their success was creativity, the ability to adapt and adjust, and use pure grit. Companies who conserved cash weathered this storm better.
In times like this, we can let this happen to us, or we can fight out of it. In my example above, the business that failed said the telephone would not ring, business stopped and they couldn't pay their bills. The competitor called every client with whom they had ever done business. Even though many of those past clients did not want services, enough did to lead to an all-time record year during a worldwide pandemic. They adjusted their services to be more appealing to what people would want today.
As I mentioned, I do see a light at the end of the tunnel for most, but not all, industries.
Obviously, personal protection equipment makers will continue to do well.
I am seeing numerous requests for information on how to break leases for commercial property. The pandemic has shown to numerous companies that working from home really works. Now the question is, "Do we need all this office space?" There may be significant vacancies which would reduce commercial rents and slow down commercial construction. Why build a building if you cannot rent what is out there today?
Residential construction and those servicing the residential industry may be on the rise as people improve their homes since they are spending more time there. There is an extreme shortage in inventory. This shortage may change if deferred mortgage payments do not get made and there are widespread foreclosures, but if we get past the pandemic in time, this will self-correct. Banks may need to recast mortgages to get back on track.
The vacation home industry continues to improve as people pass on taking distant or foreign vacations. Vacation homes are selling quickly with an even bigger shortage of inventory.
Travel, airlines, and the airline manufacturing industry will take a longer time to return to normal. Entertainment businesses will take a hit as they make a slow comeback and people start venturing out. Restaurants may disappear, but new ones will replace them. We need them; we want them.
We have not gotten things under control in the short term, as we see daily more COVID-19 cases are on the rise. However, if we are diligent, we can get back on track until there is a vaccine.
In the end, the world and our local community may look a little different a year from now, but with all our support focused on helping our local businesses, we can make a comeback faster than expected. I believe in us and know we can.
WBJ Web Partners
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