The Economic Snapback Is Here

Last week the CDC and the White House announced new guidance in removing the need for vaccinated individuals to wear masks indoors. The news caught most businesses and their customers off guard. Mandates were an early measure taken against the pandemic and the removal of these directives had been highly localized. The new guidance marked what many consider to be the first major step in a return to daily life. Employees are starting to slowly return to their offices, shoppers are ready to spend, and restaurants are serving at full capacity. After an unexpected plunge, the opportunity for growth in 2021 and 2022 could be a rare one.

When the economy began to suffer last year, many economists immediately brought up comparisons to The Great Recession. Similarities to that time period drew up negative memories, however there is a reason to be optimistic considering where our economy is now For the last 30 years the revenue for retail and foodservice has been on an upward trend with only few deviations from its linear growth. The most notable of these deviations are The Great Recession and the COVID-19 pandemic. In all cases of deviation, there was a correction to the mean and when this adjustment applies itself to the pandemic, it could be a quick snapback. The recession of 2009 had such a long recovery time in part due to the bubble created from unforeseen revenue gains in other markets subsequently bursting. As we can see in our chart there was no such bubble in 2020. We also have to consider the high amount of variables that caused the previous economic dip. When we review 2020, it is clear that the only major variable in play was the COVID-19 virus. Without the introduction of the virus, revenue would have continued to climb along its path.

With falling case numbers across the U.S. and the new CDC guidance, we could be climbing out of the economic valley of 2020. Several large and small companies have already removed face covering mandates and relaxed social distancing with more doing so in the coming weeks. Restaurants have reopened and are so busy they cannot hire enough workers to keep up with the demand. Shoppers are able and willing to spend and retail stores and restaurants have effectively thrown open the doors. Now is the time to scale up and return operations and profits to a January 2020 level. 2021 could have an estimated growth rate of up to 8.3% that could continue through 2022. This year has already shown us that consumers have been biding their time during the pandemic. The rollout of vaccines has quelled concerns over the virus and the opening of businesses has finally allowed them to spend all of that pent up energy.

The long awaited return to normal is finally upon us and the opportunity to take advantage of record growth rates will only last so long. There will be supply chain issues and labor shortages as we have already seen, yet these are the growing pains of a transition to a more familiar economy. Restaurant chains like The Wendy’s Company and Jack in the Box are seeing record revenue growth and they are looking to transform this into unit growth with grocery and retail stores likely to be close behind in the search to expand their units. Online retail became a dominant force in 2020, however that transition was built largely out of necessity. Physical retail is bouncing back in a big way and it will likely be a first come first served basis for those looking to expand.

*Estimated growth rates based on an evaluation of the U.S. Census data and are not meant to be used for financial decisions.