My latest pontification in Greenhouse Grower — click here.
Top 100 Growers say the key to their success this year is the economy — click here.
The impact of increased savings
Two forces that until recently turbo-charged US consumer spending—growing household debt and a falling savings rate—have gone into reverse. In late 2008, as households started reducing their indebtedness and saving more, consumption tumbled.
New research from the McKinsey Global Institute shows that the economic impact of further US consumer deleveraging will depend on income growth. Without it, each percentage point increase in the savings rate would reduce spending by more than $100 billion—a serious drag on any recovery. Relatively healthy income growth, on the other hand, would help households reduce their debt burden without trimming consumption as much.
Consumer spending rebounds
The economy contracted at a 6.1% annual rate in the first quarter, which was a little more than the 4.6% decrease in real GDP expected by economists. The best news in the B.E.A. report report was the rebound in Personal Consumption Expenditures during the first quarter. Consumer spending grew at 2.2% during the first quarter (see graph above) following two quarters of negative growth (-4.3% in 2008:Q4 and -3.9% in 2008:Q3), and was just slightly below the 2.27% average growth since 2001.
REUTERS — There were some bright spots in the report. Consumer spending, which accounts for over two-thirds of U.S. economic activity, rose 2.2%, after collapsing in the second half of last year. Consumer spending was boosted by a 9.4% jump in purchases of durable goods, the first advance after four quarters of decline.
WSJ — GDP acts as a scoreboard for the economy by measuring all goods and services produced. Its biggest component is consumer spending, which accounts for about 70% of GDP. First-quarter spending increased 2.2%, after dropping 4.3% in the fourth quarter.
Hopefully, a good portion of this increase in consumer spending was in the lawn and garden category. As you probably saw in the Making Cents sales poll, 46% indicated that March sales were higher than same-month sales in 2008, 4% indicated they were the same level, and 50% indicated fewer March sales than last year. This is consistent with my conversations across the country as well.
Be sure to complete the April poll on the right side of the page.
Consumer confidence is climbing
The Conference Board Consumer Confidence Index™, which had posted a slight increase in March, improved considerably in April. The Index now stands at 39.2 (1985=100), up from 26.9 in March. The Present Situation Index increased to 23.7 from 21.9 last month. The Expectations Index rose to 49.5 from 30.2 in March.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer Confidence rose in April to its highest reading in 2009, driven primarily by a significant improvement in the short-term outlook. The Present Situation Index posted a moderate gain, a sign that conditions have not deteriorated further, and may even moderately improve, in the second quarter. The sharp increase in the Expectations Index suggests that consumers believe the economy is nearing a bottom, however, this Index still remains well below levels associated with strong economic growth.”
Consumers’ appraisal of present-day conditions improved moderately in April. Those claiming business conditions are “bad” declined to 45.7 percent from 51.0 percent, while those claiming business conditions are “good” increased to 7.6 percent from 6.9 percent. Consumers’ assessment of the job market was somewhat mixed. The percentage of consumers stating jobs are “hard to get” decreased to 47.9 percent from 48.8 percent in March, however, those saying jobs are “plentiful” edged down to 4.5 percent from 4.7 percent.
Consumers’ short-term outlook improved significantly in April. Those anticipating business conditions will worsen over the next six months declined to 25.3 percent from 37.8 percent, while those expecting conditions to improve increased to 15.6 percent from 9.6 percent in March.
The employment outlook was also considerably less pessimistic. The percentage of consumers anticipating fewer jobs in the months ahead decreased to 33.6 percent from 41.6 percent, while those expecting more jobs increased to 13.9 percent from 7.3 percent. The proportion of consumers anticipating an increase in their incomes edged up to 8.0 percent from 7.8 percent.
The media is using the other "r" word
THE ECONOMIST — The world has been suffering a bleak economic winter. Yet some say that they see early signs that the chill of recession is giving way to spring. For many commentators, a hunt for the green shoots of recovery is on. Search among a selection of British and American newspapers, for example, and mentions of “green shoots” in articles about the economy have increased enormously in the past couple of months. The earth was barren in the six months or so after the collapse of Lehman Brothers, but newspapers have, with the onset of northern hemisphere spring, started to find the confidence to discuss recovery. In the past, mentions of the word recession (as mapped in an “R-word” index) have been a useful indicator of the likelihood of the real thing. Could the same be true of a green-shoots index and the likelihood of economic recovery?
Likewise, the news reference volume for the terms “Great Depression” and “worst economy” have both dropped to almost zero recently, according to Google Trends:
Mortgage rates fall again to 4.80%
According to data released today by Freddie Mac, 30-year mortgage rates fell this week to 4.80%, from 4.82% last week and 4.87% the previous week. Except for the 4.78% average during the first week of April, the 4.80% rate marks the lowest 30-year mortgage rate in history (see chart above), and is a full 4 percentage points below the 8.80% average rate since 1964. Along with falling home prices, the record-low mortgage rates are continuing to elevate housing affordability to record highs, which will help the real estate market in its recovery process this year.
Strong showing of capital goods orders
According to data released today from the Department of Commerce, orders for non-defense capital-equipment goods excluding aircraft rose 1.5% in March after a 4.3% gain in February. Such core capital-goods orders are considered the best gauge of capital spending by businesses, and are also considered a leading economic indicator. The two-month increase of 5.8% in new orders for capital goods was the strongest two-month gain in more than four years, since the 6.5% two-month increase for December 2004 and January 2005.
Latest USDA-NASS Floriculture Crops report released
Highlights from the latest Floriculture Crops report:
The 2008 wholesale value of floriculture crops is down 2 percent from the revised 2007 valuation. The total crop value at wholesale for the 15-State program for all growers with $10,000 or more in sales is estimated at $4.22 billion for 2008, compared with $4.32 billion for 2007. California continues to be the leading State with crops valued at $1.02 billion, but is down 2 percent from the 2007 value. Florida, the next largest producer, is down 5 percent from the prior year to $922 million in wholesale value. These two States account for 46 percent of the 15-State total value. For 2008, the top 5 States are California, Florida, Michigan, Texas, and North Carolina, which account for $2.80 billion, or 66 percent, of the 15-State total value.
The number of producers for 2008, at 7,189, is down 3 percent in the 15 States compared with the revised 2007 count of 7,387. The number of producers with sales of $100,000 or more dropped 5 percent to 2,967 for 2008 from 3,136 in 2007.
In the 15-State program, total covered area for floriculture crop production was 729 million square feet, 5 percent less than the revised 2007 figure. Greenhouse space for 2008, at 414 million square feet, is down 2 percent from 2007. This accounts for 57 percent of the total covered area. Shade and temporary cover is down 8 percent, to 314 million square feet. Open ground totaled 33,150 acres, 5 percent less than the revised 2007 total.
The average peak number of hired workers employed on operations in the 15-State program in 2008 is 17.0, down 1 percent from a revised 17.2 in 2007. A total of 5,313 operations hired workers during 2008, compared with 5,460 a year earlier. Overall, 74 percent of operations used some hired labor during 2008, the same as in 2007.
Click here for the full report.
Value of Home Gardening
Findings from the National Gardening Association’s (NGA) new survey, The Impact of Home and Community Gardening in America, confirm that food gardening in the U.S. is on the rise. Seven million more households plan to grow their own fruits, vegetables, herbs, or berries in 2009 than in 2008 — a 19 percent increase in participation. This anticipated increase is nearly double the 10 percent growth in vegetable gardening from 2007 to 2008 and reflects the number of new food gardeners emerging this year.
More Americans are recognizing the benefits of growing their own produce, including improved quality, taste, and cost savings. In 2008, gardeners spent a total of $2.5 billion to purchase seeds, plants, fertilizer, tools, and other gardening supplies to grow their own food. According to NGA estimates, on average a well-maintained food garden yields a $500 return when considering a typical gardener’s investment and the market price of produce.
Reminder: Shine in '09 Webinar #2
As a reminder from my earlier post (click here), you still have a few days left to register for the second webcast in our Shine in ’09 webinar series.
FYI — The recording from the first webinar is on the Ellison Chair website (click here). As you will recall, the topic of the first webinar was “Action Points to Survive the Downturn” and was presented by yours truly.
The next webinar in the series is next week!
Tuesday, April 14, 2009 – 11:00 a.m. CDT
Webinar 2 Topic: Differentiating By Being Sustainable
Dr. Don Wilkerson, Texas A&M; AgriLife Extension
Being proactive by developing your own sustainability code of ethics can help set you apart from the competition!
FYI — the final webinar in the series will be held on May 12, 2009 – 11:00 a.m. CDT. Dr. Jennifer Dennis of Purdue University will present webinar 3 which is titled “Marketing Green! The “green” marketing strategies you need to thrive in a maturing marketplace!”
If all of this sounds interesting, click here to register! And, and one more thing, there’s no charge for this webinar series, thanks to our great sponsors!