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Successfully investing in the USA

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last updated on 19 May 2021 | reading time approx. 4 minutes

 

 

 

How do you assess the current economic situation in the USA?

After be­ing dom­in­ated by the SARS-COV-2 (Cov­id-19) pan­dem­ic in 2020, the U.S. eco­nomy is now re­cov­er­ing rap­idly, with the swift vac­cine rol­lout hav­ing already reached large parts of the pop­u­la­tion. The Fed’s latest fore­casts sug­gest growth in the U.S. GDP of 6.5 per cent in 2021 com­pared to a de­crease of 2.4 per cent in 2020.

The un­em­ploy­ment rate ex­ceeded 14 per cent at times in 2020, but has since dropped to 6 per cent and will con­tin­ue to de­crease as the ex­pec­ted re­cov­ery takes hold in 2021.

Massive gov­ern­ment sup­port via U.S. stim­u­lus pro­grams is caus­ing in­fla­tion to rise. The Fed cur­rently ex­pects in­fla­tion to be 2.4 per cent. Though this ex­ceeds the Fed's long-term tar­get rate of 2 per cent, the Fed has already an­nounced that it will not con­sider rais­ing in­terest rates in the near-term to pre­vent a slow­ing of the eco­nom­ic growth.

The cur­rent drivers of growth in the U.S. GDP are the rap­id dis­tri­bu­tion of vac­cines and the re­lated re­open­ing of the eco­nomy in 2021. SARS-COV-2 vari­ants emer­ging out­side the U.S. are not ex­pec­ted to have a short-term im­pact on the growth and re­cov­ery of do­mest­ic con­sump­tion.
 

How would you describe the investment climate in the USA? Which sectors offer the largest potential?

The meas­ures taken to mit­ig­ate the eco­nom­ic con­sequences of the pan­dem­ic cre­ate short- and me­di­um-term op­por­tun­it­ies in the U.S. This is es­pe­cially true for well-man­aged and long-term ori­ented Ger­man SMEs. It is ex­pec­ted, due to the ex­per­i­ence of the pan­dem­ic, that the in­ter­na­tion­al sup­ply chain will shift back to a do­mest­ic fo­cus, es­pe­cially in the areas of med­ic­al tech­no­logy, semi­con­duct­ors, and oth­er OEM man­u­fac­tur­ing and sales seg­ments, as well as in con­sumer-ori­ented daily needs. Fur­ther­more, it is ex­pec­ted that the im­port­ance of e-com­merce and dis­tri­bu­tion of products via on­line plat­forms will in­crease even fur­ther, as well as the need for in­nov­at­ive lo­gist­ic­al solu­tions. Par­tic­u­larly, gov­ern­ment-fun­ded sub­sidies in the field of re­new­able en­er­gies are also ex­pec­ted.

In the short term, eco­nom­ic in­dic­at­ors point to strong con­sumer in­terest in the so-called “re­open­ing of the eco­nomy”, i.e., in sec­tors such as travel & leis­ure, auto­mot­ive, sports & en­ter­tain­ment, re­tail, etc.

In­creased con­sumer in­terest has led to sup­ply chain bot­tle­necks in many in­dus­tries. In ad­di­tion, the scarcity of in­ter­na­tion­al lo­gist­ic­al ca­pa­city means that com­pan­ies in the U.S. are re­act­ing and ex­pand­ing loc­al pro­duc­tion ca­pa­cit­ies or in­creas­ingly re­ly­ing on do­mest­ic sup­pli­ers. The semi­con­duct­or, hous­ing/con­struc­tion, and con­sumer goods in­dus­tries are just a few sec­tors be­ne­fit­ing from the cur­rent boom.

 

What challenges does a German entrepreneur face when it comes to engagement in the USA?

The gradu­al re­open­ing of the U.S. eco­nomy has led to im­proved pro­spects for the U.S. auto­mot­ive in­dustry in 2021. Ac­cord­ing to Fitch Rat­ings, U.S. car sales are ex­pec­ted to reach 15.6 mil­lion vehicles in 2021, an in­crease of nearly 10 per cent as com­pared to only 14.2 mil­lion vehicles in 2020. Des­pite this op­tim­ist­ic fore­cast, sales are still ex­pec­ted to re­main 8 per cent be­low 2019 levels in 2021.

Giv­en the im­proved mar­ket en­vir­on­ment and the cur­rent ad­min­is­tra­tion's in­tro­duced struc­tur­al meas­ures (such as re­join­ing the cli­mate change agree­ment), vehicle elec­tri­fic­a­tion is likely to ac­cel­er­ate, as tra­di­tion­al OEMs will need to ad­apt their product of­fer­ings to meet stricter CO2 emis­sions re­quire­ments.

 

How do you assess the future of the automotive industry in the United States?

Due to the current global pandemic, the impact on the North American automotive industry is far-reaching. It is to be expected that the demand for new registrations of motor vehicles in the passenger car sector will not return to the level of 2018/2019 in the upcoming years. The main reason for this is, above all, the reduced wealth of American households. In the field of electromobility and autonomous driving, however, significant investment impulses are to be expected in the medium term. The influence of the automotive industry is perceptible by the revival of the Detroit region.
 

How do you think the USA will develop?

Giv­en the U.S. mar­ket en­vir­on­ment and eco­nom­ic un­cer­tainty linked to key lead­ing in­dic­at­ors, clear out­comes are dif­fi­cult to pre­dict. However, ba­sic trends pre­dict a sig­ni­fic­ant eco­nom­ic up­swing based on the cur­rent suc­cess­ful vac­cin­a­tion cam­paign and stim­u­lus pack­ages already im­ple­men­ted.

The pas­sage of aid pack­ages by Con­gress is already lead­ing to a “post-pan­dem­ic boom”, and GDP growth in 2021 will be sig­ni­fic­ant. If this trend con­tin­ues in 2022, the U.S. GDP could pos­sibly re­turn to its long-term pre-pan­dem­ic growth trend by 2023.

Due to con­sid­er­able ef­forts in vari­ous in­dus­tries to make U.S. pro­duc­tion com­pet­it­ive again, our Ger­man cli­ents have the po­ten­tial to use this in­creased in­sourcing of sup­ply chains in the USA for growth. To be able to take ad­vant­age of this op­por­tun­ity, mar­ket ac­cess can in­creas­ingly only be achieved through a loc­al pres­ence.

In the short-term, the U.S. is ex­pec­ted to in­crease cor­por­ate tax­a­tion to fin­ance the stim­u­lus pro­grams that have been launched. New state-level taxes are also likely, which im­pose tax col­lec­tion or pay­ment ob­lig­a­tions on com­pan­ies de­riv­ing busi­ness from the U.S. mar­ket des­pite not hav­ing a phys­ic­al pres­ence in the coun­try.

Ex­per­i­ence shows that Ger­man com­pan­ies have ex­celled in suc­cess­ful U.S. busi­ness ven­tures when fo­cus­ing on the long-term out­come of their U.S. in­vest­ments. In the long run, eco­nom­ic con­di­tions in the U.S. con­tin­ue to at­tract in­vestors as the largest and safest eco­nom­ic hub in terms of di­ver­si­fic­a­tion, in­nov­a­tion, and growth op­por­tun­it­ies. However, the cur­rent situ­ation res­ult­ing from the glob­al pan­dem­ic re­quires con­stant re­cal­ib­ra­tion of ob­lig­a­tions. Over­all, the U.S. eco­nomy's op­por­tun­it­ies far out­weigh the cur­rent risks.

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