Ellison Chair in International Floriculture
Ellison Chair in International FloricultureTeaching, Research, Extension and Service

Economy still mixed

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It could’ve shaped up to be a good week. After all, the Senate pushed through a vote on bank reform, bellwether earnings weren’t all that bad, BP finally seems to have halted the spewing oil in the Gulf, the Northeast got a small reprieve from the heat wave — and last but not least — Apple announced plans to rectify “Antennagate.” Nevertheless, U.S. stocks ended the week on a sour note, as the Dow Jones Industrial Average plunged more than 250 points Friday.

Bank reform moves ahead. This week,  the Senate approved the most historic shakeup of the regulation of U.S. banks since the Great Depression. The legislation would place new fees and restrictions on the nation’s biggest banks, impose new restrictions on the Federal Reserve and craft a major new consumer-protection division for mortgage and credit-card products. Read more about the bank-reform legislation .

Just-in-case stimulus. Federal Reserve officials agreed it would be a good idea to study what to do if the economy were to worsen severely, according to a summary of June’s closed-door meeting released this week. Officials said the outlook for the recovery had softened between April and June, but changes to their forecast were “relatively modest” and “not warranting policy accommodation beyond that already in place.” Read more about the Fed minutes .

BP cap seems to be holding. BP shares (BP) slipped Friday as euphoria over the company’s apparent success in stopping the flow of crude from its ruptured well gave way to the realities surrounding the worst oil spill in U.S. history. In its latest update, BP said the well cap continues to hold. But the ruptured well isn’t dead yet, prompting a cautious tone from President Obama in his remarks on the spill. Read more about BP’s efforts to contain the leak .

Also, the latest from Bill Conerly.

The Java Index?

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As economists look for clues on the direction of consumer spending, they may want to look into how much Americans are willing to spend on their coffee.

Consumers have been more willing to spend since the lows of the recession, but recent declines in retail sales and confidence have sparked worries over whether spending can continue to grow in the second half of the year.

Enter the coffee indicator. A “tell-tale sign of how consumers feel about employment, income and the future is where they buy their coffee and whether they step up for the more expensive concoction,” wrote Majestic Research economist Steve Blitz in a recent research note.

Majestic Research tracks anonymous credit-card data, and can see how much consumers spend by category and store. Blitz broke out the average dollar transactions at Starbucks and Dunkin’ Donuts. The data show that during the worst of the recession consumers spent less at the two coffee outlets, but as the employment picture started to improve people were willing to spend more per transaction.

The trend reversed at the beginning of April when transaction size turned down. To be sure, much of that change is likely seasonal. Transaction size at Starbucks, especially, takes a big spike around the holidays as shoppers buy coffee baskets and mugs for those caffeine addicts on their lists. In the last two years, it has bounced back a bit through the late winter, turning down in April and then moving back up in the late summer/early fall.

So far, this year’s transactions at Starbucks and Dunkin’ Donuts is following the pattern. If that bounce back materializes in the late summer, it could indicate that consumers are still willing to open their wallets. But if the average transaction size levels off or continues to decline, it could indicate a more thrifty consumer will dominate the second half of this year.

Source: Phil Izzo, WSJ Blog, Real Time Economics

Economic news for the week

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New and Existing Home Sales Drop in May, After Expiration of Homebuyers’ Tax Credit.

New home sales fell to a record low in May, with sales of new single-family houses dropping 32.7 percent from April to a seasonally adjusted annual rate of 300,000, the lowest annual rate of sales since the Commerce Department started tracking the data in 1963 (read more here; see chart).

Excluding Transportation, Durable Goods Orders Rise.

Durable goods orders, excluding transportation, rose by  0.9 percent in May to $145.1 billion, the U.S. Census Bureau reported.  Year-over-year, durable goods, excluding transportation, increased 17.6 percent. Transportation orders fell 6.9 percent to $46.9 billion, driven by a $3.0 billion decline (29.6 percent) in nondefense aircraft and parts (read more here).

First Quarter GDP Growth Revised Downward.

The economy grew more slowly in the first quarter of 2010 than previously estimated, according to the  final  real GDP estimate from the Bureau of Economic Analysis.   GDP growth was revised to 2.7 percent, down from the second estimate of 3.0 percent, primarily reflecting a downward revision in personal consumption expenditures and net exports (read more here).

Personal Income Increases

Personal income in May 2010 increased 0.4% from April 2010.Real personal consumption expenditures (PCE) increased 0.3% and real disposable personal income (DPI) rose 0.5%.The personal savings rate as a percentage of DPI was 4.0% in May.

Consumer Confidence Rises

Consumer sentiment rose in June to its highest since January 2008 while reports of job losses were down sharply from a year ago, a survey showed on Friday. A gauge of current economic conditions also rose to its highest since January 2008, according to the Thomson Reuters/University of Michigan’s Surveys of Consumers. NEW YORK (Reuters)

America in Bloom receives award

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America in Bloom has been named to the 2010 Associations Advance America Honor Roll, a national awards program sponsored by the American Society of Association Executives & The Center for Association Leadership in Washington, D.C.

The prestigious awards program recognizes associations that propel America forward – with innovative projects in education, skills training, standards setting, business and social innovation, knowledge creation, citizenship, and community service. Although association activities have a powerful impact on everyday life, they often go unnoticed by the general public.

“America in Bloom’s program truly embodies the spirit of the Associations Advance America campaign. It is an honor and an inspiration to showcase this activity as an example of the many contributions associations are making to advance American society,” remarked Associations Advance America Committee Chair Ping Wei.

If folks in the industry would like to support AIB financially, now is the time to do it. Between now and the OFA Shortcourse, AIB is conducting one of their main fundraising events of the year — the AIB Raffle. Proceeds from the raffle and other fundraising events help America in Bloom fund numerous projects for communities and their citizens such as—webinars on plant varieties that perform well in the landscape, an annual educational symposium, and community awards.

Wouldn’t it feel good to put $5,000; $1,000, or even $500 in your pocket? If you purchase an AIB raffle ticket you just might be one of the lucky cash prize winners! The 2009 raffle generated over $30,000 in funding for America in Bloom. Buy your raffle tickets online using their secure form today!

Pick-up Truck Sales: A Green Industry Indicator?

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From CNBC:

Vehicle sales at AutoNation (America’s largest auto retailer with 200 locations nationwide) were up by 22% in May compared to last year, but pickup truck sales were up by 50% year-over-year in May. That’s a huge sign of strength for American small businesses, according to AutoNation Chairman and CEO Mike Jackson:

“I’ve always said, when you want to know when this economy is going to turn, just watch the pickup sales.  All those sales are small businesses and entrepreneurs, and when they see the prospect for better business, they’re going to go out and finally buy a new pickup truck. So this is a key indicator of what’s going on in the U.S. economy.  This is small business America saying that the worst is over, I see opportunities in the future, I feel confident enough to go out and buy a new truck.

Pickup trucks are bought by small business entrepreneurs who have their finger on the pulse of the U.S. economy. It’s an expression of confidence in future of economy. They don’t buy until they see the prospects for business are brighter.”

HT: Mike LaFaive; Mark Perry

Last chance to register for Seeley Conference

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The 25th annual Seeley conference is only 2 weeks away (June 26-29, 2010 in Ithaca, NY) and there are a few seats left. This year’s theme is: Floriculture’s Environmental Footprint: An Inconvenient Truth or Consumer Opportunity?

For several years, we’ve heard about global warming and climate change as issues we need to address. Of course, the real issues revolve around what it means for the bottom line for our individual businesses. How will the outcomes of the current legislative debate impact us?  Are there modifications we need to make to stay in business once the debate ends and the laws are enacted?  Will our businesses be able to remain financially solvent or will regulations force us out of business? These are but a few of the critical questions this year’s conference will address and the think-tank atmosphere of the Seeley Conference will allow for plenty of interaction with fellow industry leaders.

Kicking off the conference is Dr. Rob Stavins who is Director of the Harvard University’s Environmental Economics Program. A second keynote will be delivered by Joel Makower, Executive Editor of GreenBiz.com, whom the Associated Press refers to as the “guru of green business practices.”  Steve Windhager of the Ladybird Johnson Wildflower Center closes the first day with an overview of the newly released Sustainable Sites Initiative guidelines.

The second day starts with case study presentations by representatives from Walmart and the Food Marketing Institute relating their respective sustainability experiences. This will be followed up with detailed presentations from Kaji Kado of PPD Technologies and Will Healy from Ball Horticulture with each of them discussing procedures for calculating water and carbon footprints using life cycle analysis. The day will wrap up with case study discussions from floriculture and nursery industry leaders regarding their respective successes and challenges in this area.

The closing keynote address on the last morning of the conference will be given by Robert Dolibois, Executive Vice President of the American Nursery & Landscape Association (ANLA) who will highlight the responses made by green industry participants in addressing environmental issues, the importance of consumer and legislator perceptions about our products and services, and what is being done in the industry to convey our value proposition of enhancing the lives of consumers through ecosystems services and other benefits (health, aesthetics, economic, etc). The final speaker on the program will be Fred Haberman who will lead attendees in a discussion of how best to tell their story regarding their sustainability-related business practices.

As always, the think-tank atmosphere of the Seeley Conference will allow for plenty of interaction with fellow industry leaders regarding these timely issues. One of the objectives of the conference is for attendees to have a very concrete, well-defined plan for addressing the issues discussed as they go back to their respective businesses. This year promises to not only do that but provide a very necessary primer on this critical issue facing the industry.

To register online and to find more information regarding the 2010 Seeley Conference and this year’s program, the conference website is www.hort.cornell.edu/seeleyconference, or Facebook users can refer to the Seeley Conference fan page.

The nature of Extension Service delivery and partnerships in the future?

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An “Ask an Expert” partnership of the Alabama Cooperative Extension Service (ACES), eXtension, and Bonnie Plants is now operational. A new ACES position, Outreach Programs Administrator, funded by Bonnie Plants was filled earlier this month to handle incoming questions. The Ask an Expert widget is now up and running on the Bonnie Plants home page and on their other pages with how-to-grow content. As reported on May 20, fifteen questions have already been received in the last few days (a dozen in the last 24 hours) from nine states. Both eXtension and ACES are gaining visibility from this unique partnership.

New Age of Natural Gas

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The Energy Information Administration released new data yesterday showing that natural gas production in the U.S. reached an all-time historical monthly high in March of 2.313 trillion cubic feet, breaking the previous record of 2.28 trillion cubic feet set in March of last year by almost 33 billion cubic feet (see graph).

As Mark Perry has reported previously, the U.S. is now the world’s largest producer of natural gas, having surpassed Russia’s production last year to become the new “Saudi Arabia of natural gas.”  It’s all because of a breakthrough in drilling technology, involving the use of three-dimensional seismic imaging and hydraulic fracturing of shale rock, so that huge amounts of natural gas are being produced in New York, Pennsylvania, Texas, Louisiana and other states.  In 2000, shale gas accounted for only about 1% of our natural gas supply, but now about 20% of gas comes from advanced shale drilling, and that breakthrough is responsible for boosting gas production to record high levels.

The abundance of natural gas in the U.S. was completely unexpected as recently as seven years ago when Alan Greenspan in 2003 warned that shortages of natural gas could hurt the U.S. economy.  We’re now in a new age of natural gas because of advanced technologies, and it’s going to be a real game-changer. Will this have an impact on how greenhouse growers decide to heat their greenhouses in the future? Duh.

Mark Perry’s full post here.

Consumer spending is increasing…slightly.

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In his latest issue of the Businomics Newsletter, Bill Conerly displayed this chart, which shows that consumer spending has fully regained the pre-recession peak:

PI C

This has led several people to ask where the consumers have gotten the income to spend.  After all, employment is still well beneath its previous peak.  So let’s go through the process, using data available from the U.S. Bureau of Economic Analysis.  (He uses data not adjusted for inflation, but the inflation adjustment is relatively small these days.)

Here’s total personal income:

PI PI

It has not regained its prior peak, but it’s not as weak as employment, thanks to the non-labor income component of personal income:

PI nonLabor

The big gainer within this category is transfer payments, primarily social security and unemployment insurance.

Taxes have dropped in the recession.

PI Tax

As a result, disposable income (income minus tax payments) has indeed risen:

PI DI
It’s not a huge gain, but neither is the increase in consumer spending he was trying to explain.