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

Forecasting retail sales via satellite

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From Mark Perry’s blog Carpe Diem:

“As part of a growing trend among hedge funds and Wall Street firms, Cold War-style satellite surveillance is being used to gather market-moving information.  The surveillance pictures are often provided by private- sector companies like DigitalGlobe in Colorado and GeoEye in Virginia, which build and launch satellites and take pictures for US government intelligence agency clients and private-sector satellite analysis firms.

That means there are two links in the chain before the satellite data gets to Wall Street—a satellite firm takes the pictures and sells them to an analysis firm, which scrutinizes the images and sells the aggregated data to hedge funds and Wall Street analysts.

UBS analyst Neil Currie had been looking at satellite data on Wal-Mart during each month of 2010, and he’d concluded that there was enough correlation between what he was seeing in the satellite pictures of Wal-Mart’s parking lots to the big-box chain’s quarterly earnings, that he was ready to incorporate that data into UBS’ report on Wal-Mart, which releases its earnings on Tuesday.

Currie purchased his analysis from a small two-year old Chicago-based firm called Remote Sensing Metrics LLC, which had scoured satellite images of more than 100 Wal-Mart stores chosen as a representative sample. By counting the cars in Wal-Mart’s parking lots month in and month out, Remote Sensing Metrics analysts were able to get a fix on the company’s customer flow. From there, they worked up a mathematical regression to come up with a prediction of the company’s quarterly revenue each month.

UBS predicts that Wal-Mart’s second quarter sales will be up from the first quarter, but down a percent against the same period a year ago. But the satellite analysts figure that the number will come in 0.7 percent higher—not lower—based on the traffic surge they saw in the parking lots.”

Read more here.

Are we sliding back into recession?

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Robert Barr’s comments from the latest trend tracker:

Is the recovery petering out?  Are we at the onset of another dip into recession?  The latest news seems ominous, and even former Federal Reserve Chairman Greenspan said in mid-July that “the economy hit an invisible wall in early June.”

There are some hopeful signs, however, including a show of resiliency in the well-respected economic activity indexes published by the Institute of Supply Management.  And monetary policy remains in gear for economic growth, with continued low interest rates.

One issue that makes the short-term forecast particularly challenging at this point is the impact Washington is having on the economy.  At a minimum, it’s creating additional uncertainty that makes expanding businesses and hiring more workers at this point in the recovery even more an act of faith that it usually is.

The chief executive of Verizon Communications, Ivan Seidenberg, said it clearly in June: “By reaching into virtually every sector of economic life, the government is injecting uncertainty into the marketplace.”  The result?  More difficulty for business in raising capital, expanding existing businesses, and creating new businesses –the last thing this economy needs now.

Add to that the tax hike in store at the beginning of 2011 with the expiration of the 2003 Bush tax cuts, the uneasiness over the impact of the health care law, and concerns over the expanding federal debt load.  These costs will impede the economic recovery, especially a few years from now, as interest rates rise and the cost of servicing the national debt takes bigger and bigger chunks of our tax revenue.

So it’s easy to talk yourself into a lot of pessimism about the economy.  But will these concerns strangle our nascent recovery?  Will government policy push us into another round of recession over the next year?

Well, probably not, or so we’re thinking.  While we recognize the burden Washington is placing on the economy and would argue that economic growth will be measurably less in the coming year than it could have been with better federal economic policy, we don’t think it’s enough to smother the recovery.  Productivity growth and improved technology keep the recovery going.  As for the 2011 tax increases, they’ll be smaller than those imposed on the economy in the early 1990s, and nobody today speaks of the Clinton recession.  Monetary policy had a lot to do with maintaining economic growth then, and policy today is even more stimulative.

So although we think we’ll avoid a double-dip recession in 2010-11, economic growth over the next three or four years will be underwhelming, we believe.  There are several elements of the Congressional and Administration approach to the economy that are damaging the entrepreneurial climate (see, for example, the labor policies that push up wages through politics and not productivity, the treatment of Chrysler bondholders relative to the auto workers union, and threat of imposing cap-and-trade on American businesses and households) – but we think we’ll get through the next year with the recovery intact and, in fact, stronger than it appears to be now.

But we can’t escape the conclusion that the biggest economic risk may be the continued apparent antipathy toward commercial activity from Washington, coupled with the resulting increase in entrepreneurial uncertainty.

Robert Barr is an economist based in Virginia.


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

Bernanke comments on happiness

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An excerpt from Ben Bernanke’s speech at the University of South Carolina Commencement Ceremony, Columbia, South Carolina, May 8, 2010:

Notwithstanding that income contributes to well-being, the economics of happiness is also a useful antidote to the tendency of economists to focus exclusively on material determinants of social welfare, such as the GDP. GDP is not itself the final objective of policy, just as an increase in income may not be a good enough reason for you to change jobs. Obtaining broader measures of human welfare is challenging, but not impossible…

But even though GDP or income should not be the only goal of our strivings, we can go one step further and recognize as well that happiness itself, at least to the extent that the term is associated with immediate rather than long-lasting feelings and emotions, should not be our only goal either. Remember that I began by distinguishing between happiness and life satisfaction. Happiness is just one component of the broader, longer-term concept of life satisfaction, and only one indicator of how the fabric of our lives is being shaped by our choices and circumstances.

I am reminded of a story about Abraham Lincoln. According to the story, Lincoln was riding with a friend in a carriage on a rainy evening. As they rode, Lincoln told the friend that he believed in what economists would call the utility-maximizing theory of behavior, that people always act so as to maximize their own happiness, and for no other reason. Just then, the carriage crossed a bridge, and Lincoln saw a pig stuck in the muddy riverbank. Telling the carriage driver to stop, Lincoln struggled through the rain and mud, picked up the pig, and carried it to safety. When the muddy Lincoln returned to the carriage, his friend naturally pointed out that he had just disproved his own hypothesis by putting himself to great trouble and discomfort to save a pig. “Not at all,” said Lincoln. “What I did is perfectly consistent with my theory. If I hadn’t saved that pig, I would have felt terrible.”

The story points out that, sometimes, happiness is nature’s way of telling us we are doing the right thing. True. But, by the same token, ephemeral feelings of happiness are not always reliable indicators we are on the right path. Ultimately, life satisfaction requires more than just happiness. Sometimes, difficult choices can open the doors to future opportunities, and the short-run pain can be worth the long-run gain. Just as importantly, life satisfaction requires an ethical framework. Everyone needs such a framework. In the short run, it is possible that doing the ethical thing will make you feel, well, unhappy. In the long run, though, it is essential for a well-balanced and satisfying life.

New website launched

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As you might have gathered in the last few days, the look and feel of the Ellison Chair website has changed and went live yesterday! Here are few of the notable changes:

  1. The Making Cents of Green Industry Economics blog has been incorporated into the website and there is a subscription button on the home page to subscribe if you’d like. If you are already a subscriber, you don’t have to do a thing; you will continue to get notified by email when new posts are ready.
  2. A Tags section serves as a subject matter index to blog entries that have been posted over the last couple of years.
  3. There is also a new multimedia section, with links to upcoming and previously recording webinars, Distinguished Lectures, the Introductory Employee Training Program, and You Tube videos that are saved on the Ellison Chair channel.
  4. For nuts & bolts stuff you can use in your business, there are new content pages associated with the emphasis areas of the Chair (marketing & economics, sustainability, water, efficient production systems, etc.).
  5. A new Facebook fan page section directs you to selected FB pages I think you’ll find interesting.

Feel free to look around and if you have a minute, check out the quick tour by clicking on the video below:

Click HERE for the tour!

Weather Brings Retailers a GOLDEN Egg this Easter Weekend!

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From Bill Kirk, Weather Trends International:

After three very disappointing Easter periods the past few years with record cold and snow, retailers are about to lay a golden egg this holiday weekend (the most important period in Q1).

The weather will be nothing short of exceptional with the NORTHEAST having the most ideal conditions – warmest and driest in 20+ years for the Easter weekend.  The last time Easter weather was this ideal was in middle April 2006 when 1,543 record high temperatures were set across the country – this year is even better in the Northeast!  In 2006, Easter weekend temperatures in the Northeast averaged 73°F, 2007 38°F, 2008 46°F, last year 57°F and this year near 80°F!  This will result in strong double and even triple digit sales gains over last year for Spring seasonal items like Easter seasonal categories/candy, fans, garden items, grills, deck stains, car wash/wax, bug sprays, allergy medications, suncare, apparel, sandals, cold beer and beverages, outdoor BBQ grilling food categories, ice cream snacks and more.

Across the rest of the country the holiday weekend (Friday – Sunday) conditions are still favorable for the Eastern half of the U.S., but a bit colder/wetter in the West.  Here’s the regional summary:

SOUTHEAST: Warmest in 4 years (average high temperatures 81°F) and 57% drier than last year.

SOUTH CENTRAL: Warmest in 4 years (average high temperatures 75°F) but on the damp side with the threat for widespread thunderstorms.

NORTH CENTRAL: Warmest in 4 years (average high temperatures 62F) with some rain South.

NORTH ROCKY MOUNTAINS: 11 degrees colder than last year but a little drier than last year – Sunday is the nicest day.

SOUTH ROCKY MOUNTAINS: Cold start but warmer finish by Sunday.

SOUTHWEST: Coldest in several years but a warm up by Sunday.

NORTHWEST: 6 degrees colder than last year and the wettest in 5 years so this is the least favorable region this weekend.

Nationally, the 5-week retail calendar March is on pace to be the warmest and driest in 3 years with the least snowfall in 20+ years (snowfall down 61% vs last year).  Retailers are coming off the worst March ever last year when retail same-store-sales (SSS) were down 5.1% according to ICSC’s tally of retailers, so the combination of easy sales comparisons and exceptional Easter weather will bring a lot of golden eggs when retail sales are announced April 8th!  Expectations on Wall Street are +3.0% to +3.5% while WTI expects retail industry SSS gains to be much stronger at +4.5% to +6%.  The 4th straight better than expected month for retailers!

There's a market for anything!

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Florida’s special python hunting season has begun…which proves the point, economically speaking, that a market can be established for just about anything.

Click here for the full story.

If you want a good laugh from a snake story well told, click on his link at the bottom (r.e. his irrational view of snakes).

Say Goodbye to the McMansion

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Times have changed, and the square footage of new American homes is dropping. Super-sized homes are out, and efficiency and versatility are in. MarketWatch’s Amy Hoak reports on the latest building trends.

http://s.wsj.net/media/swf/main.swf