Photo of a windy road in the mountains.

December economic outlook: Looking back, looking forward

Quick takeaways

  • 2022 will not be 2021. But it probably won’t be 2019 either. Vaccines and treatments hold promise to help manage the pandemic in this country. But we’re not a global island, and how other countries fare will continue to affect critical pieces of our economy.
  • You may feel uncertain about your financial outlook. That’s to be expected. Use the end of the year to reevaluate your priorities and redirect your financial goals if needed.

To try to understand 2021 and get a sense of the economic outlook for 2022, it’s helpful to talk about cardboard boxes.

Accepting our global connections

Cardboard is manufactured all over the world, from China to the United States, Sweden, and Japan.1 Pre-pandemic, if a shoe manufacturer needed some boxes to ship out the season’s hot kicks, they simply placed an order. Any hiccups in the supply chain for cardboard were likely isolated. A winter storm shutters a German plant for a week? Plenty of cardboard boxes were sitting elsewhere on trucks and ships and in warehouses.

Now imagine those hiccups occurring at every point along the economic chain, for months at a time: closed factories in Germany, China, and the U.S.; full ships and trucks, unloaded because of a dearth of dock workers and drivers; empty warehouses because cardboard is all gone for who knows how long. It’s a system-wide snarl that has trickled down over the year to you and to businesses like the shoe manufacturer that has finished shoes but no way to box them up and get them to stores (and on your feet).

“If the pandemic made one thing apparent, it’s how interconnected life is,” says Heather Winston, assistant director of financial advice and planning at Principal®. “We’re all part of a giant spider web that touches so many aspects of our lives.”

Graphic stating that the capacity of the biggest container ships is 16,000, 95% of consumer goods enter the U.S. in a container, and the contents of one container could be 10,000 pairs of sneakers, 200 queen-size mattresses, and 70 giant flat-screen TVs.

If everything is interconnected, then the challenges a country faces a half a globe away may find their way to our doorsteps and our economy—whether we like it or not. “Everybody in the world is grappling with this, and it seems there’s going to continue to be this tension for a while,” Winston says.

Your wallet: What unforeseen events happened to you in 2021, and how can you use what you learned to plan for 2022? For example, if you had a surprise car or home repair, maybe you can automate deposits to your emergency fund so you’re replenishing and growing those savings without thinking about it. (Don’t have one? Learn how and why to set up an emergency fund.)

Living with uncertainty

Part of what’s made the pandemic economy so difficult to navigate is illustrated by that cardboard box. Pre-pandemic, it seemed like there was just one thing to worry about—that specific factory in Germany closing for a single week, for example.

Now it seems like you worry about everything, all at once. “The trajectories of what we felt like we were dealing with were a lot clearer,” Winston says. “Now we’re all in this foggy middle ground where we feel like we don’t have any control.”

The economy is still reeling from the continuous shocks to the entire system, and companies and people everywhere aren’t sure how to plan. Will a restaurant be able to hire enough people to reopen not just for dinner, but lunch too? Can that shoe manufacturer complete and ship new designs in time for back-to-school shopping? Will you, as a consumer, find your comfort level in 2022 and take a delayed vacation?

Graphic showing statistics of the 2021 economy. The cost to send a container from Shanghai to Los Angeles was $2,000 in 2019 and $25,000 in early 2021. Lumber price per thousand board feet was $389 in August 2021 and $1,515 in May 2021. New vehicles for sale was 3.5 million in September 2019 and less than 1 million in September 2021. Average end-to-end shipping time from China to the U.S. was 40 days in 2019 and 73 days in 2021.

Living with uncertainty, from supply chains to restaurant staffing, may be the norm for 2022 … until suddenly it’s not anymore. Remember when toilet paper went from hot commodity to plentiful supply?

Your wallet: If uncertainty is the immediate future, that may continue to impact your economic outlook and financial priorities. Focus on what you can control instead. How much are you saving in your retirement fund? Is it enough to reach your goals? Our Retirement Wellness Planner is a great place to start.

Reexamining our priorities

Last year, holidays and rituals were upended. We missed out; we had to adapt.

This year? Things probably look better for many, even if they don’t look the same quite yet.

You may end this year filled with uncertainty, but surrounded, finally, by the people you love. You may not be able to get exactly what you want to buy when you want to buy it, but maybe you’ll find a substitute. We’re all wondering what’s around the corner.

What have you learned about your needs and wants? What matters most to you as you look forward to the new year?”

Heather Winston, assistant director of financial advice and planning

“Last year, there were many times where we felt adrift,” Winston says. “This year, reflect on how you adapted and adjusted to living within a pandemic. What have you learned about your needs and wants? What matters most to you as you look forward to the new year?”

Your wallet: Winston suggests asking yourself what’s most critical to your life. Then, work backward from there. Setting up a financial plan may help.

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