by Antonio Acunzo

The US has been hit hard by COVID to the point that not even the Great Depression of the 1930s has managed to inflict such invasive damage. Despite this, the world's largest economy has restarted and the recovery forecasts not only are optimistic but see a comeback for 2021 that ranges from the Z-shaped recovery (with a return to pre-covid levels in the course of 2021 thanks to consumption recovery and domestic air travel rise) to the U-shaped recovery (more conservative in recovery times but always projected to pre-covid levels).

The US economy enjoyed 23 consecutive quarters of growth from 2014 up to Q1 2020 when it experienced a -5% contraction, as estimated by the U.S. Bureau of Economic Analysis, the second worst decline after -8.4% in Q4 2008 at the peak of the financial crisis.

Among the industries that have experienced the greatest contraction, the production of means of transport, and aircraft in particular, suffered the most.

Boeing, the main US exporter in terms of dollar value, has recorded a decline in orders since January 2020 (805 lost orders for the 737MAX alone) along with announcing the end of the production line of the 747 Jumbo Jet after completing the final 16 747s currently on order, and a turnover reduction currently forecast at $72 billion against a previously estimated forecast of $110 billions for 2020. Commercial air transport, together with the hospitality industry, is the sector that has recorded the greatest decline with a -92% reduction in passengers on US domestic flights YoY, while the hotel industry has seen room occupancy falling to 24.5% in the April compared to the previous period of 2019. In addition to the contraction experienced in professional services, construction and retail sales, it’s the retail business that has claimed several victims including leading companies such as Brooks Brothers, JC Penney, J.Crew, Neiman Marcus, Hertz, GNC, Sur La Table and Muji who filed for bankruptcy due to Covid-19 and requested Chapter 11 procedure to restructure the debt and reorganize the new business model.

But here are the positive aspects:

US consumers are currently much stronger than during the 2008 crisis, the real estate market does not record increases in the selling prices of properties and bank deposits as well as rates on savings current accounts are increasing. Federal aid has replaced the 30% loss in wages by limiting further growth in the unemployment rate while 32% of US small businesses benefited from loans facilitated by the SBA Paycheck Protection Program Loan to protect employee salary retention.

1.8 million jobs were added in July 2020, in addition to 4.8 million jobs added in June 2020, and 2.5 million in May, bringing the unemployment rate down to 10.2%, a sharp rise from the 14.7% recorded in April and 19.5% in May.

An important recovery signal of the US economy comes from air transport where airlines started resume flying following a renewed strong domestic demand, with a capacity of 30-55% compared to pre-covid levels, and with forecasts that see a cautious but rosy optimism with a break-even horizon for a carrier such as Delta Air Lines already expected for Spring 2021. Restaurants are back in business reaching 60% bookings today compared to a year ago, hotels have 44% occupancy in New York and 49% in a primary holiday market such as Florida, mortgage requests for purchases of new homes see an increase of 18% compared to last year, and the real estate market seems not to be affected by a decline (data updated to the week of 20 June 2020).

The US remains the main recipient of FDI (foreign direct investment) with inflows of $253.6 billion in 2018, $246.2 billion in 2019 and $51 billion in Q1 2020.

Obviously, flows slowed in Q2 due to Covid and the UNCTAD (United Nations Conference on Trade and Development) has estimated a global FDI contraction of around 40% by 2021 due to economic uncertainty following the pandemic and a global slowdown with reduced profit margins for multinational companies which in turn have less financial capacity for new investments both as greenfields and for expansions and M&A. The US appears to be the least penalized market compared to smaller emerging economies, with renewed investor and business confidence, and FDI growth optimism for 2021.

Furthermore, the American GDP in a YoY comparison today records, with values updated to 10 July 2020, a positive growth of 0.3% compared to a negative value for Chinese and European fronts (China -6.8%, Eurozone -3.1%).

Antonio Acunzo is Co-founder & CEO of Aventura, FL-based MTW GROUP-Foreign Market Entry Advisors, an International Business Advisory founded in Florida in 2005, and with Asia Regional Office in Singapore since 2009, providing Market-Entry Strategy, Brand Marketing, Corporate and Legal advisory and services to SMEs and Mid-Market companies eyeing selected markets in Asia, and in the USA, for their business growth and expansion in the form of JV, M&A, FDI and Export ( *