Building Numbers Look Positive For Greenhouse Growers

Economic recoveries usually get their biggest kick from a rebound in the most cyclical parts of the economy. Consumer spending on big-ticket items tends to increase as worries about job security subside, hiring increases and income and household wealth rise. Once consumers are back on their feet, homebuilding (and associated landscaping) and business fixed investment typically ramp back up and inventories rise in line with the higher level of economic activity.

Spending And Investment Are Increasing

We now see the key cyclical drivers of economic activity kicking into a slightly higher gear. Spending for big ticket items appears to have caught a tailwind from the gradual improvement in the job market, the rise in home prices, and the booming stock market. Business fixed investment also appears to be on a sturdier foundation, led by strong private sector demand, a booming energy sector and somewhat-stabilizing global economy. Finally, homebuilding appears to be well on its way to a self-reinforcing recovery.

The year began amid a great deal of angst about the fiscal cliff and the federal budget sequestration. Now that both events have passed, confidence is increasing that economic growth will find a way through the clouds hanging over fiscal policy. Even the puny 0.1 percentage point rise in fourth quarter 2012 real GDP growth was not too much cause for concern. Most of the quarter’s weakness was due to a 22 percent plunge in defense spending, which was at least partially tied to preparations for the impending sequestration.

Consumers appear to have also shrugged off much of Washington’s latest shenanigans. Even the expiration of the two-percentage point payroll tax holiday appears to have elicited little initial response, though time will reveal the longer-term effect. Consumer spending through the first two months of 2013 has held up relatively well, even with the added burden of sharply higher gasoline prices.

Commercial Construction Shows Positive Movement
On a different note, according to the American Institute of Architects, the Architectural Billings index has been positive for seven consecutive months now and suggests some increase in commercial real estate investment in the second half of 2013. (There is an approximate nine- to twelve-month lag time between architecture billings and construction spending on non-residential construction.) Every building sector is expanding and new project inquiries are strongly positive — the highest since January 2007. This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, schools, hospitals and other institutions.

That is good news for the green industry since a whole lot of flowers, shrubs and trees (and subsequent landscape maintenance services) will be potentially needed for those construction projects.

Rise In Stock Market Still Not Matched With Jobs And Salaries
However, the relentless march of the equity markets has raised concerns as to whether monetary policy is fueling another bubble. But folks should not overestimate the importance of the stock market reaching a new high, because it hasn’t been matched by a similar increase in incomes and job prospects. The Dow may be back to its old highs, but there is still nearly a $1 trillion gap between what the economy is capable of producing and what it’s actually producing. The unemployment rate is hovering around eight percent, and the average earnings in the private sector, adjusted for inflation, have barely budged for five years.

Interestingly, the main driver for the recent stock market bolstering has been the monetary policies of the Federal Reserve Bank. Currently, the Fed’s quantitative easing (QE) policies are pushing an extra $85 billion per month into the financial system, on top of about $2 trillion from its previous stimulus-related efforts. It is buying a mix of Treasury bonds (which help lower U.S. government borrowing costs) and mortgage-backed securities (which help lower mortgage rates).

A key operating theory at the Fed of how these help growth is known as the “portfolio balance channel.” The Fed buys securities. The investors who otherwise would have bought those bonds have to invest in something else. Maybe it’s corporate debt, maybe it’s the stock market, but either way it props up private asset prices and makes it cheaper and more desirable for companies to invest. Higher prices for stocks and other assets also have “wealth effects,” making the people who own those securities feel richer and therefore more willing to spend. It is no coincidence that the rally in the stock market this spring has come about following speeches by Fed officials suggesting that QE policies aren’t going away anytime soon.

This isn’t the Fed’s fault; they’re just trying to use the tools they have to get enough growth to bring down unemployment, and it just happens that the tools they have work through channels that favor those with lots of financial assets. It would be within the power of Congress to do something to ensure those policies benefit the masses. It even had one such policy in place until a couple of months ago: the payroll tax holiday, in which the government, with its ultra-low borrowing costs courtesy of the Fed, increased Americans’ after-tax paycheck by two percent. We knew that it was going to have to go away eventually to keep the finances of Social Security sustainable, but in fiscal cliff negotiations at the end of the year, there was no strong push to replace it with any other policies to try to pump money into the hands of ordinary Americans.

The Fed has basically one tool to affect the economy: It decides whether to make money cheaper or more expensive. As long as the central bank is the only entity in Washington doing anything to try to strengthen growth, no one should be surprised if Wall Street keeps rallying and the real economy is slow to keep up.    GG

Leave a Reply

More From State of the Industry...
Status of Marijuana US Map May 2015

May 29, 2015

Marijuana Legalization Updates

As of April 2015, 23 states and the District of Columbia (D.C.) currently have laws legalizing marijuana in some capacity. At the federal level, several bills are currently awaiting action. Here is an update on current state and federal marijuana legislation across the U.S.

Read More
cannabis, marijuana plant

May 29, 2015

Making The Decision To Produce Medical Marijuana

Should horticultural growers consider cultivating medical marijuana? That’s up to the individual grower, of course, and certainly a number of growers already have jumped in. We at Meister Media Worldwide, publishers of Greenhouse Grower and American Vegetable Grower, do not necessarily endorse nor oppose the production of medical marijuana. But we do feel it is an option worth exploring. We intend our “Medical Marijuana” series of articles to give you information you need to make your own call. We hope you find it useful, and we do welcome your comments, thoughts and ideas as we continue to cover what we’re fairly certain is only going to be an increasingly viable and growing market for this emerging crop.

Read More
Double Whammy Merchandise Display At CAST2015

May 28, 2015

Grow Inspiration To Grow The Horticulture Industry

We need to work together as the horticulture industry to inspire and instruct consumers with our plant knowledge and marketing expertise.

Read More
Latest Stories
Status of Marijuana US Map May 2015

May 29, 2015

Marijuana Legalization Updates

As of April 2015, 23 states and the District of Columbia (D.C.) currently have laws legalizing marijuana in some capacity. At the federal level, several bills are currently awaiting action. Here is an update on current state and federal marijuana legislation across the U.S.

Read More
cannabis, marijuana plant

May 29, 2015

Making The Decision To Produce Medical Marijuana

Should horticultural growers consider cultivating medical marijuana? That’s up to the individual grower, of course, and certainly a number of growers already have jumped in. We at Meister Media Worldwide, publishers of Greenhouse Grower and American Vegetable Grower, do not necessarily endorse nor oppose the production of medical marijuana. But we do feel it is an option worth exploring. We intend our “Medical Marijuana” series of articles to give you information you need to make your own call. We hope you find it useful, and we do welcome your comments, thoughts and ideas as we continue to cover what we’re fairly certain is only going to be an increasingly viable and growing market for this emerging crop.

Read More
water

May 27, 2015

California Growers To Voluntarily Cut Back Water Use

Farmers in the Sacramento-San Joaquin River Delta have agreed to reduce their water use by 25 percent in exchange for assurance that they will not face further curtailment during the June-September growing season. The proposal was approved by the State Water Resources Control Board on Friday, May 22. “This proposal helps Delta growers manage the risk of potentially deeper curtailment, while ensuring significant water conservation efforts in this fourth year of drought,” State Water Board Chair Felicia Marcus says. “It allows participating growers to share in the sacrifice that people throughout the state are facing because of the severe drought, while protecting their economic well-being by giving them some certainty regarding exercise of the State Water Board’s enforcement discretion at the beginning of the planting season.” Growers who participate in the program could opt to either reduce water diversions under their riparian rights by 25 percent, or fallow 25 percent of their land. In both cases, the […]

Read More
Farwest2015

May 20, 2015

2015 Farwest Show Announces Second Annual Equipment Inn…

The second annual Equipment Innovation Day will be Tuesday, Aug. 25, prior to the 2015 Farwest show, which will be August 27-29 in Portland, Ore. Equipment Innovation Day, which was enthusiastically received in 2014, offers a real-time opportunity to see new heavy and automated nursery equipment in action. The demonstrations take place in manufacturing and nursery settings, adding value to the showcase. Attendees will be able to talk with participating manufacturers and learn first-hand from innovative growers who use the equipment in daily operations. The day-long event will be held at the main manufacturing plant of GK Machines, Inc., Donald, Ore. Further demonstrations of field equipment will take place at the nearby nursery of A&R Spada Farms, LLC. Bus travel to and from the event is planned, starting at and returning to the Oregon Convention Center. Attendees are welcome to provide their own travel to and from the site. Preregistration is required. The cost […]

Read More
CCGGA-Scholarship-Winners

May 20, 2015

Central Coast Greenhouse Growers Association Awards 201…

The Central Coast Greenhouse Growers Association (CCGGA) is awarding 20 scholarships this year to high school and college students. CCGGA-member nurseries raised money for the scholarship fund and each donated a portion of the fundraising sales to the fund, which is open to students currently enrolled in college for the following year. The scholarship program is also available to students of employees who work at CCGGA-member nurseries One of the organization’s goals is to continue encouraging future generations to enter the horticulture field and to promote higher education within the families that work in the local nursery business. The 2015 CCGGA scholarship recipients are: Aloysia Shea – Nipomo High School Andrew McHaney – CSalinas High School Angel Flores – Righetti High School Beatriz Barajas – San Jose State University Carolanne Garibay – Monterey Peninsula College Cladia Lavina – Salinas High School Erica Marquez-Ibarra – San Jose State University Jorge Zarate […]

Read More

May 18, 2015

Download Greenhouse Grower’s 2015 Top 100 Growers…

Greenhouse Grower‘s Top 100 Growers Survey revealed that our projections in the 2015 State Of The Industry report were correct: Growers, at least the large ones, are expanding. Greenhouse Grower’s annual Top 100 List ranks the largest U.S. growers by total square feet of environmentally controlled greenhouse space, although this year, we have also listed shade and field acreage, to give perspective on how large these operations are beyond the greenhouse. In total, the 2015 list represents 228,906,001 environmentally controlled square feet of U.S. production, a 5 percent increase over 2014. All told, 26 growers reported that their operation grew between 2014 and 2015. Several growers reduced their production over the past year, as well, and while some operations’ downsized numbers were significant, most were slight and probably typical of the give-and-take in the horticulture industry. Greenhouse Grower‘s 2015 Top 100 Growers Whitepaper includes all the results of the survey, […]

Read More
USDA Logo

May 13, 2015

New Report Shows College Graduates With Agriculture Deg…

A new report from the USDA shows high demand for recent college graduates with agriculture degrees, with an estimated 57,900  high-skilled job openings annually in the food, agriculture, renewable natural resources and environment fields in the U.S. According to an employment outlook report released by the USDA’s National Institute of Food and Agriculture (NIFA) and Purdue University, there is an average of 35,400 new U.S. graduates with a bachelor’s degree or higher in agriculture related fields, 22,500 short of the jobs available annually. “There is incredible opportunity for highly-skilled jobs in agriculture,” says Agriculture Secretary Tom Vilsack. “Those receiving degrees in agricultural fields can expect to have ample career opportunities. Not only will those who study agriculture be likely to get well-paying jobs upon graduation, they will also have the satisfaction of working in a field that addresses some of the world’s most pressing challenges. These jobs will only become more […]

Read More
USDA Logo

May 6, 2015

USDA Awards $10 Million In Grants To Universities To Ad…

More than $10 million has been awarded to U.S. universities to address critical water problems, such as water quality and availability, in rural and agricultural watersheds across the country. The awards were made through the U.S. Department of Agriculture’s National Institute of Food and Agriculture (NIFA) Agriculture and Food Research Initiative (AFRI) Water for Agriculture challenge area and the National Integrated Water Quality Program (NIWQP). “Water is our most precious resource, one that is essential for both human survival and well-being and for our ability to grow our crops and livestock,” says Sonny Ramaswamy, NIFA director. “By funding research, Extension and education for citizens and the agriculture community, we are able to proactively create solutions to water-related issues like drought and its impact on food security.” The AFRI Water for Agriculture challenge area was first introduced in fiscal year (FY) 2014, and these grants represent the first year of funding for the program. Funded […]

Read More
fngla

May 6, 2015

Florida Nursery, Growers And Landscape Association Name…

Florida Nursery, Growers and Landscape Association (FNGLA) has awarded a group of individuals through its FNGLA Industry Awards Program for their contributions to the industry. This year’s winners will be honored during FNGLA’s Annual Convention in Coral Gables on June 13, as part of FNGLA’s Annual Meeting. FNGLA’s Industry Awards Program acknowledges both FNGLA and industry service, with varying criteria geared for each award. Nominations are accepted from the industry-at-large and winners are selected by a committee of industry peers. The Wendell Butler Award and the FNGLA Hall of Fame are recognized as the most prestigious awards given by FNGLA. The Wendell Butler Award is presented for service to FNGLA and the FNGLA Hall of Fame Award is a lifetime achievement award. Nominations are accepted from the industry at large. FNGLA Hall of Fame Inductee: Hugh Gramling, Tampa Bay Wholesale Growers (Plant City, Fla.), retired Wendell E. Butler Award: Theresa & Kevin Riley, […]

Read More
water

May 6, 2015

Record Low Snowpack Continues In The West

Across the Western U.S., snowpack has melted sooner than usual, according to data from the fourth 2015 forecast by the United States Department of Agriculture’s Natural Resources Conservation Service (NRCS). “Almost all of the West Coast continues to have a record low snowpack,” NRCS Hydrologist David Garen says. “March was warm and dry in most of the West; as a result, snow is melting earlier than usual.” Historically, April 1 is the peak snowpack. This year, the peak came earlier. There was little snow accumulation in March, and much of the existing snow has already melted. “The only holdouts are higher elevations in the Rockies,” Garen says. “Look at the map and you’ll see that almost everywhere else is red.” Red indicates less than half of the normal snowpack remains. A consequence of the early snowmelt is that Western states will have reduced streamflow later this spring and summer. In Western states where snowmelt […]

Read More
RedPeppers_RosanaPrada_Flickr

April 29, 2015

Nature Fresh Farms To Build 175-Acre Greenhouse Facilit…

Growing fresh vegetables in the Midwest is about to take a major turn in a new direction as Nature Fresh Farms has announced a large-scale investment in northwest Ohio. The company broke ground on April 10 to begin construction on a 175-acre greenhouse facility in Delta, Ohio. “This is an exciting time for Nature Fresh Farms as we expand our operations to include a U.S. growing facility,” said Nature Fresh Farms President Peter Quiring in a press release. “This development will allow us to better serve our Ohio customers with locally grown produce, year-round and continue to grow our U.S. operations.” Contingent upon acceptable levels of incentives from the State of Ohio and other government authorities, as well as utility rates agreeable to Nature Fresh, the company would be poised to ship its first case of vegetables in December 2015. The greenhouse project will be completed in several phases over the […]

Read More
RISE logo

April 29, 2015

RISE Delivers Petition Urging President Obama To Protec…

Responsible Industry for a Sound Environment (RISE) delivered a pollinator petition to the White House Council on Environmental Quality, urging President Obama to create more habitat and forage areas for pollinators, and to consider all sources of information on, and contributors to the pollinator health issue. Nearly 600 citizens from across the U.S. signed the petition. “Our petition shows President Obama that citizens want a balanced and substantive conversation to happen on the pollinator health issue,” says Aaron Hobbs, RISE president. “The pollinator issue is very complex and research points to multiple factors affecting pollinators, including pests and parasites, microbial diseases, nutrition problems, bee management practices and climate change.” According to Hobbs, the petition highlights some of the steps the industry is taking to support pollinators. This includes creating pollinator-friendly habitats and forage areas through integrated vegetation management in utility rights-of-way and large tracts of land. “We do applaud the White House for including in […]

Read More
HRI logo

April 8, 2015

Horticultural Research Institute Accepting Scholarship …

The Horticultural Research Institute (HRI) is offering seven scholarships for the 2015-2016 school year, totaling $20,000. Applications will be accepted through May 31.

Read More
protecting bees and pollinators video

March 31, 2015

New Video On Protecting Bees And Pollinators Educates H…

A new educational video that provides information on the horticultural industry’s essential role in bee and pollinator stewardship is one result of industry collaboration by the Horticultural Research Institute, AmericanHort, Society of American Florists and the American Floral Endowment. “Protecting Bees & Pollinators: What Horticulture Needs to Know,” narrates the current state of bee and pollinator health, provides information on factors that impact pollinators and the environment and underscores the beneficial role horticulture plays in providing healthy pollinator ecosystems.

Read More

March 25, 2015

NASS Reports U.S. Honey Production Was Up By 19 Percent…

Honey production in 2014 from producers with five or more colonies totaled 178 million pounds, up 19 percent from 2013, according to a March 20 report from the USDA's National Agricultural Statistics Service (NASS).

Read More
cultivate'15 logo

March 4, 2015

Cultivate’15: AmericanHort Announces What’s…

In an industry that has seen major changes occurring at a fast pace, many industry professionals leave Cultivate with their heads spinning and no clear idea of how to regroup and strategize. Cultivate’15 is “Changing the Game.” As this year’s focus, Changing the Game will call your attention to the ways in which our industry has changed and your opportunities to compete successfully.

Read More
Greenhouse Grower State of the Industry

February 2, 2015

Download Greenhouse Grower’s 2015 State Of The In…

The Greenhouse Grower 2015 State Of The Industry Whitepaper includes all the results of the survey, including comparisons on 2014 sales to past years, details on how 2015 production volume and prices will compare to 2014, crops that growers will increase and decrease production on, where growers stand on using neonicotinoids on crops, how many growers will pursue growing medical marijuana and more.

Read More

January 27, 2015

Benchmarks: Let’s Change Our Story

It's a new year. Time for our industry to change how consumers perceive plants by creating a new reality where plants are valued for more than their physical beauty.

Read More