The Forecast for 2019 - Bright Skies or Storm Clouds?RETAILING •Independent Garden Centers...
Transcript of The Forecast for 2019 - Bright Skies or Storm Clouds?RETAILING •Independent Garden Centers...
The Forecast for 2019 - Bright Skies or Storm Clouds?
Dr. Charlie Hall
Texas A&M University
Clearing up errant assumptions
•Stock market performance does not equal economic performance.
•Consumer confidence does not equal economic performance.
MINING OIL WELLS FORESTRYFISHERIES
CHEMICAL PLANTSMETAL WORKING
Mature stageConsolidationShakeoutHyper-competitiveInnovative
ConsumersMarginsLaborHousingDistributionEconomy
Issues
Structural aspects
• Financial • Distribution• Marketing• Trade Assn.• Media / Pubs
Trade AgreementsTrade Barriers & Import RestrictionsAPHIS/Plant Protection Quarantine
Patents, Royalties & CopyrightsEnvironmental protection regulations
Pesticide and chemical regulations
Regulatory
End Consumer
•Bouquet manufacturers•Wholesale florists•Landscape contractors•Maintenance firms•Arborists•Re-Wholesalers•Landscape architects
SERVICE FIRMS
$92B
$59B
$31B Nursery& Greenhouse
Firms
RETAILING•Independent Garden Centers•Grower-Retailers•Florists•Supermarket floral depts.•Discount mass
merchants•Home improvement centers•Farmers markets•Hardware stores•Mail order & internet
INSTITUTIONAL•Schools; Churches•Hotels; Resorts•Hospitals•Restaurants
•Interior landscapes•Golf courses•Corporate landscapes•Public areas - ROWs•Community parks
PAPER MILLS
Paper products:(Catalogs; signs;
packaging)
Wrappings,Containers,
Labels,Irrigation
PLASTICSMANUFACTURING
Oil, fuel, & other
petroleumproducts
Plant protection products
FERTILIZERPLANTS
Structures, tools, equip &
Machinery
AG COLLEGES;RESEARCH FARMS
Peat & Bark
products
Services
-16%
+10%-3%
$196 Billion Green Industry Supply Chain
MINING OIL WELLS FORESTRYFISHERIES
CHEMICAL PLANTSMETAL WORKING
Mature stageConsolidationShakeoutHyper-competitiveInnovative
ConsumersMarginsLaborHousingDistributionEconomy
Issues
Structural aspects
• Financial • Distribution• Marketing• Trade Assn.• Media / Pubs
IMPORTS:•Columbia, The Netherlands,•Ecuador, Mexico, Canada, •Guatemala, Australia, Israel,•England, Costa Rica, Hawaii,•Philippines, Japan, China,
Africa
EXPORTS:•Market Area to Market Area•Between states•Canada•Europe
Trade AgreementsTrade Barriers & Import RestrictionsAPHIS/Plant Protection Quarantine
Patents, Royalties & CopyrightsEnvironmental protection regulations
Pesticide and chemical regulations
Regulatory
TradeINDIRECTMARKETING
DIRECTMARKETING
End Consumer
•Bouquet manufacturers•Wholesale florists•Landscape contractors•Maintenance firms•Arborists•Re-Wholesalers•Landscape architects
SERVICE FIRMS
$92B
$59B
$31B Nursery& Greenhouse
Firms
RETAILING•Independent Garden Centers•Grower-Retailers•Florists•Supermarket floral depts.•Discount mass
merchants•Home improvement centers•Farmers markets•Hardware stores•Mail order & internet
INSTITUTIONAL•Schools; Churches•Hotels; Resorts•Hospitals•Restaurants
•Interior landscapes•Golf courses•Corporate landscapes•Public areas - ROWs•Community parks
PAPER MILLS
Paper products:(Catalogs; signs;
packaging)
Wrappings,Containers,
Labels,Irrigation
PLASTICSMANUFACTURING
Oil, fuel, & other
petroleumproducts
Plant protection products
FERTILIZERPLANTS
Structures, tools, equip &
Machinery
BREEDERSPropagators
Brokers
AG COLLEGES;RESEARCH FARMS
Peat & Bark
products
Services
-16%
+10%-3%
$196 Billion Green Industry Supply Chain
ConsumersMarginsLaborHousingDistributionEconomy
Issues
People afford what they want.-- (Lowell Catlett)
?
DIFM
$7T
ConsumersMarginsLaborHousingDistributionEconomy
Issues
✅
Margin compression
Index of prices paid = 121.7 +3.43% YOY
ConsumersMarginsLaborHousingDistributionEconomy
Issues
✅
✅
Unemployment rate – 3.9%; U6 rate 7.6%
Average hourly earnings up 3.2% YOY
CPI up 2.2% YOY
Labor force participation rate at 63.1%
7.1M – 15M vacancies / yr.
ConsumersMarginsLaborHousingDistributionEconomy
Issues
✅
✅
✅
Housing market
• 1.3 M starts• Home prices up 5.5% YOY• Lack of existing home
inventory (<2 mos.)• Remodeling up 7%• Rising number of 1st-time
buyersHEADWINDS
• Lumber prices• Shortage of lots• Labor availability• Tax Cuts & Jobs Act
ConsumersMarginsLaborHousingDistributionEconomy
Issues
✅
✅
✅
✅
• Freight rates are up 9.5% YOY.
• Shortage of drivers.
• Tonnage increasing by 3.4% YOY.
• Cost increases due to ELD, demand, etc.
ConsumersMarginsLaborHousingDistributionEconomy
Issues
✅
✅
✅
✅
✅
Current Economic Conditions
Year Regular $/gal
Diesel $/gal
2015 $2.43 $2.71
2016 $2.15 $2.31
2017 $2.42 $2.65
2018 $2.73 $3.17
2019 $2.50 $2.95
Aging population
Mobile workforce
Web conferencing
Millennials drive less
Urban pop growth
Interest rates
Jerome Powell
Long-term Economic Forecast
Federal Debt Held by the Public
• Federal spending on interest payments on the debt will increase.• Lawmakers would have less flexibility to use tax and spending
policies to respond to unexpected challenges.• The likelihood of a fiscal crisis in the United States will increase.
When will the next recession start?
St. Louis Fed Financial Stress Index
• Average weekly hours, manufacturing• Average weekly initial claims for unemployment insurance•Manufacturers’ new orders, consumer goods and materials• ISM Index of New Orders•Manufacturers' new orders, nondefense goods excluding aircraft • Building permits, new private housing units• Stock prices, 500 common stocks• Leading Credit Index™• Interest rate spread, 10-year Treasury bonds less federal funds• Average consumer expectations for business conditions
Dec 2017
Yield Curve
• Ceteris paribus
25% chance of recession during 2019
50% chance of recession during 2020
80% chance of recession during 2021
Likelihood of recession
What could derail this outlook?
• Monetary or fiscal policy gone awry.
• Trade war effects.
• OPEC reneging on output deal.
• A bubble bursting.
• Deep recession in China/Europe.
Do you have a contingency plan in place?
1. How prepared am I for the next downturn?
2. What predetermined strategies should I have in place?
Uncertainty
If you always do what you’ve always done, you’ll always get what you’ve always gotten!