The Forecast for Bright Skies or Storm Clouds? Dr. Charlie Hall Texas A&M University

Transcription

1 The Forecast for Bright Skies or Storm Clouds? Dr. Charlie Hall Texas A&M University c-hall@tamu.edu

2 Clearing up errant assumptions Stock market performance does not equal economic performance. Consumer confidence does not equal economic performance.

3 $196 Billion Green Industry Supply Chain Services Financial Distribution Marketing Trade Assn. Media / Pubs Regulatory Trade Agreements Trade Barriers & Import Restrictions APHIS/Plant Protection Quarantine Patents, Royalties & Copyrights Environmental protection regulations Pesticide and chemical regulations $59B RETAILING Independent Garden Centers Grower-Retailers Florists Supermarket floral depts. Discount mass Structures, tools, equip & Machinery METAL WORKING merchants Home improvement centers Farmers markets Hardware stores Mail order & internet -3% AG COLLEGES; RESEARCH FARMS Plant protection products CHEMICAL PLANTS End Consumer INSTITUTIONAL Schools; Churches Hotels; Resorts Hospitals Restaurants $92B $31B Nursery & Greenhouse Firms Oil, fuel, & other petroleum products Interior landscapes Golf courses Corporate landscapes Public areas - ROWs Community parks SERVICE FIRMS +10% Bouquet manufacturers Wholesale florists Landscape contractors Maintenance firms Arborists Re-Wholesalers Landscape architects Wrappings, Containers, Labels, Irrigation PLASTICS MANUFACTURING -16% FERTILIZER PLANTS Paper products: (Catalogs; signs; packaging) MINING OIL WELLS FISHERIES FORESTRY Peat & Bark products PAPER MILLS Structural aspects Mature stage Consolidation Shakeout Hypercompetitive Innovative Issues Consumers Margins Labor Housing Distribution Economy

4 $196 Billion Green Industry Supply Chain Services Financial Distribution Marketing Trade Assn. Media / Pubs Regulatory Trade Agreements Trade Barriers & Import Restrictions APHIS/Plant Protection Quarantine Patents, Royalties & Copyrights Environmental protection regulations Pesticide and chemical regulations $59B RETAILING Independent Garden Centers Grower-Retailers Florists Supermarket floral depts. Discount mass METAL WORKING DIRECT MARKETING AG COLLEGES; RESEARCH FARMS Structures, tools, equip & Machinery merchants Home improvement centers Farmers markets Hardware stores Mail order & internet -3% Plant protection products CHEMICAL PLANTS End Consumer $92B $31B Nursery & Greenhouse Firms Oil, fuel, & other petroleum products INSTITUTIONAL Schools; Churches Hotels; Resorts Hospitals Restaurants -16% SERVICE FIRMS Bouquet manufacturers Wholesale florists Landscape contractors Maintenance firms Arborists Re-Wholesalers Landscape architects Wrappings, Containers, Labels, Irrigation PLASTICS MANUFACTURING Interior landscapes Golf courses Corporate landscapes Public areas - ROWs Community parks INDIRECT MARKETING BREEDERS Propagators Brokers FERTILIZER PLANTS +10% Paper products: (Catalogs; signs; packaging) MINING OIL WELLS FISHERIES FORESTRY EXPORTS: Market Area to Market Area Between states Canada Europe Trade IMPORTS: Columbia, The Netherlands, Ecuador, Mexico, Canada, Guatemala, Australia, Israel, England, Costa Rica, Hawaii, Philippines, Japan, China, Africa Peat & Bark products PAPER MILLS Structural aspects Mature stage Consolidation Shakeout Hypercompetitive Innovative Issues Consumers Margins Labor Housing Distribution Economy

5 Issues Consumers Margins Labor Housing Distribution Economy

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7 People afford what they want. -- (Lowell Catlett)

8 ? DIFM $7T

9 Issues Consumers Margins Labor Housing Distribution Economy

10 Margin compression Index of prices paid = % YOY

11 Issues Consumers Margins Labor Housing Distribution Economy

12 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.

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15 Issues Consumers Margins Labor Housing Distribution Economy

16 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 1 st -time buyers HEADWINDS Lumber prices Shortage of lots Labor availability Tax Cuts & Jobs Act

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20 Issues Consumers Margins Labor Housing Distribution Economy

21 Freight rates are up 9.5% YOY. Shortage of drivers. Tonnage increasing by 3.4% YOY. Cost increases due to ELD, demand, etc.

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24 Issues Consumers Margins Labor Housing Distribution Economy

25 Current Economic Conditions

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27 Aging population Mobile workforce Web conferencing Millennials drive less Urban pop growth Year Regular $/gal Diesel $/gal 2015 $2.43 $ $2.15 $ $2.42 $ $2.73 $ $2.50 $2.95

28 Interest rates Jerome Powell

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33 Long-term Economic Forecast

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35 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. Federal Debt Held by the Public

36 When will the next recession start?

37 St. Louis Fed Financial Stress Index

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39 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

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41 Yield Curve Dec 2017

42 Likelihood of recession Ceteris paribus 25% chance of recession during % chance of recession during % chance of recession during 2021

43 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.

44 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?

45 Uncertainty

46 If you always do what you ve always done, you ll always get what you ve always gotten!