COVID-19 Is Still Present but Business Hopes are Vying for Growth

You may not believe it, but there is hope for business growth in 2021.

The United Nations, for one, is projecting stronger growth than expected this year as businesses in the United States are jockeying for better bottom lines and more openings rather than closings.

The global economy is expected to grow by 4.7% this year, faster than predicted in September (4.3%), thanks in part to a stronger recovery in the United States, where progress in distributing vaccines and a fresh fiscal stimulus of $1.9 trillion are expected to boost consumer spending, says a new report by the United Nations Conference on Trade and Development (UNCTAD). 

Not to be overly pessimistic but rather realistic, the UN agency that deals with trade, investment and development issues, pointed out that this growth rate will nonetheless leave the global economy over $10 trillion short of where it could have been by the end of 2021 if it had stayed on the pre-pandemic trend and with persistent worries about the reality behind the rhetoric of a more resilient future.

The report issued March 18 cautioned that what the global economy doesn’t need right now is “A misguided return to austerity after a deep and destructive recession.” This is the main risk to its global outlook, UNCTAD said.

The report said outdated economic dogmas, weak multilateral cooperation and a widespread reluctance to tackle the problems of inequality, indebtedness and insufficient investment – all worsening thanks to COVID-19. It suggests that, without a change of course, the new normal for many will be an unbalanced recovery, vulnerability to further shocks and persistent economic insecurity.

The global recovery that began in the third quarter of 2020 is expected to continue through 2021, albeit with a good deal of unevenness and unpredictability, reflecting epidemiological, policy and coordination uncertainties.

But even barring an immediate return of austerity, the report noted, it will take more than one year for output and employment to return to their pre-COVID-19 levels in most countries with employment, income inequality and public welfare over the medium term depending on the evolution of policy responses. However, the report warned that COVID-19, which claimed 2.7 million lives around the world and afflicted 124.6 million, will likely have lasting economic, as well as health consequences, which will require continued government support.

The $1.9 trillion stimulus package in the U.S. is grounds for encouragement, the United Nations said. However, while the package contains large cash transfers, there is much less direct spending on consumption and investment, which would offer the safest route to aggregate demand expansion and a green transition. This makes the full effect of the package uncertain.

More troubling, according to the report, is that other advanced countries are lagging far behind. There are also signs that the new U.S. administration is extending its efforts to the multilateral level, endorsing a $500 billion issuance of new special drawing rights to support global liquidity at the upcoming G20 meeting, previously blocked by the Trump administration.

This is a welcome move but, according to UNCTAD, the scale of the debt threat, particularly for developing countries, cannot be reduced without debt forgiveness and the adoption of a functioning debt workout mechanism.

How does this play on Main Street, USA? According to CNBC, for the first time in years, retailers across the country are planning to open more stores than they are closing. Are these two forecasts connected? Don’t know but they sound good as they’ve been issued at the same time.

The network reported that retailers such as Ulta Beauty, Sephora, Dick’s Sporting Goods, Five Below and TJ Maxx are rebounding from the pandemic and looking to expand. Many businesses also see an opportunity to sign shorter leases, which can allow them to experiment with different formats.

Year to date, retailers in the US have announced 3,199 store openings and 2,548 closures, according to a tracking by Coresight Research.

Even iconic Toys R Us, the toy chain that filed for bankruptcy in 2017 and ultimately liquidated, has a new owner that is looking to open stores ahead of the 2021 holidays. Nothing like retail excitement on the street spurs consumer enthusiasm to buy.

CNBC also reported that many of the companies that have planned for openings this year are focused on value. They range from Dollar General and Dollar Tree to off-price retailers Burlington and Ross Stores and the discount grocers Aldi and Lidl. However, specialty retailers are in the mix, including L Brands’ Bath & Body Works and Gap’s Old Navy. In other words, shell-shocked consumers aren’t ready to shop at upscale stores but discounters have their attention.

Burlington Stores, for one, is planning 75 net new stores for this year. The off-price retailer’s plans include opening about 100 new locations, while closing or relocating 25.

It seems that country is turning a corner at least with business attitudes. Consumers may not be ready to swarm back but they can be coaxed back to your store. The rollout of the COVID vaccine keeps ramping up, stimulus checks are landing in many Americans’ bank accounts, and companies are by and large predicting a strong rebound of the consumer. The National Retail Federation is forecasting retail sales in the US could grow anywhere between 6.5% and 8.2% this year, with the economy accelerating at its fastest clip in two decades.

All told, after the pandemic turned many American Main Streets into scenes of post-war devastation, this is encouraging news but nonetheless be careful as you hang the “Open” sign on your door. Share your ideas for opening with your neighborhood and marketplace as well as your trading partners. Share good ideas and best practices. As they say, a rising tide lifts all boats.

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