The Economy In 2013

Can We Survive Another Recession?

Why does the economy feel so fragile even though it continues to be in the midst of a slow but steady expansion? It’s because we did not get the same bounce in growth that has typically followed previous recessions. After the downturn of the mid-1970s and early-1980s, the economy grew at close to 6 percent for two years — erasing all of the economic losses that had occurred. That surge never happened this time; we simply moved into a snail-paced, private sector expansion that has left us wanting more.

Despite Trouble Abroad, U.S. Reaches Tipping Point

Economic weakness in the euro zone is also not helping the U.S. economy. Problems in Europe have caused the value of the dollar to rise slightly, and weak European demand for imports is having a negative effect on the global economy.
The fundamentals of our economy, however, have been trending more favorably in recent months, in spite of what is happening in Europe, Japan, China and the rest of the world. The balance sheet of most U.S. households has improved considerably over the last year, and we appear to have finally reached a tipping point where spending can be more self-sustaining. Employment has picked up after a lull last summer. Wages are stagnant but appear to have bottomed after being cut during the height of the recession.

Deleveraging has accelerated, so overall debt loads have dropped. We are back to the levels of debt we saw in 2003, prior to the run-up during the housing market bubble. That isn’t perfect, but it may be enough to ease credit for many consumers. Net worth has recovered much of the ground that was lost to the recession.

The State Of The Housing Market

Refinancing has increased, reducing mortgage payments and leaving more for consumers to spend each month. Consumer sentiment has picked up and returned to levels not seen since before the recession. Assessments of current economic conditions, the largest determinant of current spending, have generally improved. This has made it easier for consumers to convert refinancing savings into spending for big-ticket purchases, hence the precipitous drop we saw in the savings rate last summer.

Home prices, in particular, have bottomed and are moving up again. With foreclosures and short sales accounting for a smaller proportion of overall sales, home prices have firmed up slightly more than expected. The median price of an existing home has risen approximately 11 percent over the past year, and the S&P/Case-Shiller 10-city home price index is now up almost 1 percent year over year. New home prices have also improved, reflecting less effective competition from distressed sales. Many of the best properties have already been sold, and what is left is either geographically or physically less attractive than new construction.

This, coupled with expectations that home prices will continue to rise, is important because the wealth effects tied to housing are much larger than those tied to equity holdings. It’s easier to repair and upgrade (i.e. landscape) a house that is appreciating than one that is depreciating in value. Rising home values are a game changer because they make it easier for consumers to decide to spend and invest in their homes and, ultimately, sell what they bought at a profit. Housing got us into this mess, and in fits and starts, will be the accelerant that eventually gets us out.

Initial forecasts for housing in 2013 are quite favorable. For example, economists at Goldman Sachs project housing starts to continue to rise, reaching an annual rate of 1 million by the end of 2013 and 1.5 million by the end of 2016. Fannie Mae Chief Economist Doug Duncan is forecasting an 18.4 percent increase in housing starts in 2013 to 888,000, and single-family starts increasing to 611,000. Other housing pundits are forecasting similarly. This is relatively good news for the green industry, which supplies many of the flowers, shrubs, trees and turf for these new homes.

A Possible Recession In 2013

Of course, the economic outlook for 2013 is directly dependent on how our government handled the fiscal cliff that began at the end of last year. Since I am writing this column well before the end of the year, I have no idea whether the fiscal cliff was diverted or not — whether the proverbial can was kicked further down the road or whether actual partisan compromises were made. If we indeed were allowed to go over the cliff, the good news is that we are making big strides in reducing the deficit. The bad news is that we are likely headed for another recession in 2013, though not as large as the last one.

If our legislators instead diverted going over the cliff and continued some of the Bush-era and Obama-era tax cuts and reduced some of the proposed mandatory spending cuts, the short-term effects on the economy will be mitigated, but the long-term implications of our already-too-large national debt still loom ahead of us. Either way, we are going to have to go through some economic pain — we can either endure it now or endure it later.

The need for our government to do something about reducing the long-term deficit is very important, though, because that is what will restore corporate confidence. That is necessary to get companies in the green industry to hire and invest more aggressively.

America also faces pressing questions about how changes to the population are and will be reshaping the economy. The first Baby Boomers turned 65 on Jan. 1, 2011. Since then, more than 10,000 Boomers turn 65 every day until 2030. This change should not come as a surprise. We have long known this crucial shift in population would one day come and could have better prepared for the day. Of course, the U.S. is not alone. Japan, China and Europe are also facing demographic challenges. While the aforementioned fiscal problems demand our attention, we can’t forget to look ahead to the future and see how demographic trends will change where, how and with whom we do business over the next few years. Successful firms in the green industry will pay attention to these trends and position themselves accordingly.

Leave a Reply

More From Finance/Operations...
PP&L CAST 2015 intros

April 22, 2015

6 Breeding Companies Serve Up New Varieties At Pacific Plug & Liner

Pacific Plug & Liner’s theme this year, Labyrinth, a conservatory of the world’s most captivating plants, was perfectly topped off (pun intended) with fascinators for the women and newsboy caps for the men. The PP&L team dressed their part to act out the gothic “conservatory of the world’s most captivating plants.” Truly, the displays looked like they practically popped out of a catalog, and the costumes were a nice touch. Retailers take heed, the fully merchandised displays at Pacific Plug & Liner are worthy of emulating. We’ll let the pictures tell the story of all the fabulous variety introductions presented at  Pacific Plug & Liner’s 2015 California Spring Trials, where Cultivaris, Cohen Nurseries, Histil Nurseries, Jaldety Nurseries, Southern Living/Sunset Collection and Pacific Plug & Liner all highlighted their 2016 introductions.  

Read More
Speedling 2015 CAST intros

April 22, 2015

Speedling Inc. Presents New Varieties From ABZ Seeds, Hem Genetics, Thompson & Morgan, Vista Farms & PSI

You name it, we saw it at Speedling's California Spring Trials location in San Juan Bautista, where five companies showed off their new introductions for 2016.

Read More
PittMoss on Shark Tank

April 22, 2015

PittMoss Wins On Shark Tank

Mont Handley, president and CEO of PittMoss, appeared on ABC’s Shark Tank on April 17 to try to get the “sharks” to invest in his peat moss alternative. Three investors from the TV show contributed $600,000 to PittMoss for a 35 percent stake in the company. Check out this clip from ABC’s website in which Mark Cuban, Kevin O’Leary and Robert Herjavec discuss getting on board with the product. PittMoss is an alternative to sphagnum peat moss, made up of a mix of proprietary additives and recycled paper rescued from landfill space. Handley founded the Pittsburgh-based company in 1994. What started as a small experiment grew into a full-fledged business with the help of funding provided by an EPA SBIR grant and Pittsburgh’s Idea Foundry. Today, PittMoss is available to commercial greenhouses and nurseries from Michigan to Maine to North Carolina, with plans to grow. To learn more, visit PittMoss’ website, or check it […]

Read More
Latest Stories
PittMoss on Shark Tank

April 22, 2015

PittMoss Wins On Shark Tank

Mont Handley, president and CEO of PittMoss, appeared on ABC’s Shark Tank on April 17 to try to get the “sharks” to invest in his peat moss alternative. Three investors from the TV show contributed $600,000 to PittMoss for a 35 percent stake in the company. Check out this clip from ABC’s website in which Mark Cuban, Kevin O’Leary and Robert Herjavec discuss getting on board with the product. PittMoss is an alternative to sphagnum peat moss, made up of a mix of proprietary additives and recycled paper rescued from landfill space. Handley founded the Pittsburgh-based company in 1994. What started as a small experiment grew into a full-fledged business with the help of funding provided by an EPA SBIR grant and Pittsburgh’s Idea Foundry. Today, PittMoss is available to commercial greenhouses and nurseries from Michigan to Maine to North Carolina, with plans to grow. To learn more, visit PittMoss’ website, or check it […]

Read More
Syngenta logo

April 15, 2015

Syngenta Names Chris Freeman Senior Key Account Manager…

Chris Freeman is the new senior key account manager for Syngenta Flowers, Home & Garden's Commercial Sales business in the Americas, effective March 2015. Freeman, who joined Syngenta in 2006, carries more than 25 years of experience in the agriculture and floriculture business.

Read More
Lake Buchanan_LCRA

April 10, 2015

USDA Designates Areas Of West And Southwest As Drought …

The ongoing drought has resulted in disaster area designations in counties across nine Western and Southwestern states, including Texas, where some reservoirs are at or near historically low levels.

Read More

April 9, 2015

Altman Plants’ Online Cactus Shop Shows Strong Sa…

Altman Plants recently opened its new Cactus Shop, an online retail store that sells a variety of cactus and succulents. The store is a take-off of Altman’s original wholesale business, as the company started as a mail order catalog.

Read More
Dummen

April 8, 2015

Dümmen Group Welcomes Jim Devereux And Andrew Konicki T…

Dümmen group recently announced the addition of Jim Devereux and Andrew Konicki to its team. They are the newest members of the Key Account and Broker Support team for Dümmen, and will be responsible for building, developing and maintaining current broker and grower customer relationships.

Read More
Gov._Jerry_Brown_California

April 8, 2015

California Institutes First Ever Statewide Mandatory Wa…

California Gov. Jerry Brown announced April 1 that, for the first time in state history, action will be taken to implement mandatory water restrictions, with the ultimate goal of reducing water usage by 25 percent. As Californians are pushed to conserve more, growers will need to think about how demand for products will be affected.

Read More
DNA-logo

March 31, 2015

DNA Green Group Will Acquire Rijnplant

DNA Green Group and Riknplant have finalized DNA Green Group's acquisition of Rijnplant, meaning that the breeding and propagation activities in pot and cut anthurium, bougainvillea and heliconia will transfer to DNA Green Group.

Read More
AFE scholarship_Ryan Dickson

March 25, 2015

AFE Educational Grant And Scholarship Application Deadl…

Apply now for American Floral Endowment (AFE) scholarships or educational grants. Applications can be found online. For educational grants for 2015-2016, applications must be submitted no later than June 1. Scholarship applications are due May 1. AFE will award $40,000 in scholarships for 2015.

Read More

March 23, 2015

UF/IFAS Appoints Joseph Albano As Director Of Mid-Flori…

The University of Florida's Institute of Food and Agricultural Sciences (UF/IFAS) has a new directors for its Mid-Florida Research and Education Center (REC) on Apopka, Fla. The role has been filled by Joseph Albano, a research horticulturist from the U.S. Department of Agriculture with more than 25 years of experience.

Read More

March 17, 2015

Pike Nurseries Implements Employee Stock Ownership Plan

Independent garden retailer Pike Nurseries has announced it will become an employee-owned company. Pike Nurseries management has combined with its sister corporation in California, Armstrong Garden Centers, to operate under an established Employee Stock Ownership Plan (ESOP).

Read More
GrowIt! App Wins Gold At Design100 2014 US Mobile & App Design Awards

March 10, 2015

GrowIt! Mobile App Now Available For Android

The mobile app GrowIt! Garden Socially can now be used by gardeners with Android-based smartphones. Now available on the Google Play Market, GrowIt! helps users find plants to fit their lifestyle and connect them with other local gardeners.

Read More

March 4, 2015

Second Annual GreenhouseConnect Will Bring Growers and …

Following a successful inaugural event in Tampa last fall, Greenhouse Grower has announced the dates of its second annual GreenhouseConnect: October 26-29, 2015. Representatives of an expected two dozen leading greenhouse operations from across the U.S. will join senior-level suppliers at Rancho Bernardo Inn in San Diego for several days of one-on-one strategic meetings, a growers-only roundtable, informational sessions and a variety of networking events.

Read More

March 4, 2015

Maryland Green Industry Associations Unite

The Maryland Nursery and Landscape Association recently announced that it is expanding its reach to include the greenhouse industry, meaning it has become The Maryland Nursery, Landscape and Greenhouse Association (MNLGA). The change comes as a result of the planned dissolution of the former Maryland Greenhouse Growers Association and the invitation for those members to join the existing and renamed association.

Read More
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Ann…

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
myers industries Lawn and Garden Logo

February 24, 2015

Myers Industries, Inc. Lawn And Garden Business Sold, N…

The management of Myers Lawn and Garden Group, along with Wingate Partners V, L.P. have recently acquired the Myers Industries, Inc. Lawn and Garden business. The new company is named The HC Companies, and will continue as a North American leading provider of horticulture containers supplying the greenhouse, nursery and retail markets.

Read More
american-hort-logo

February 17, 2015

AmericanHort Announces New Board Members

AmericanHort recently announced the election of new officers and members to the board of directors. Each will assume their positions on the board during Cultivate’15, July 11 to 14 in Columbus, Ohio.

Read More
All American Selections

February 17, 2015

All-America Selections Elects New Officers, Names New J…

While meeting during the Flower and Vegetable Seed Conference in Tampa, Fla., hosted by the American Seed Trade Association, All-America Selections elected new officers for a two-year term. Read on to learn about the new officers, as well as all of the new judges that were added in 2014.

Read More
Greenhouse Grower.com on your desktop, on your phone, on your tablet

February 11, 2015

GreenhouseGrower.com Relaunches With Responsive Design …

Greenhouse Grower magazine, the nation’s leader in profits, production and education for greenhouse growers, announces the launch of its completely redesigned website, GreenhouseGrower.com. The new design is the product of direct user feedback and GreenhouseGrower.com analytics, and includes responsive design for ease of mobile use.

Read More