Presently the Green Industry is experiencing a third year of growth that is higher than the overall U.S. economic growth rate. Growth appears poised to continue through 2013, after that we may see a slow down or slight recession in 2014. More about that later.
We are growing because we, as Americans, refuse not to. The economic situation is not a healthy environment. As stated by Baron’s, “Not since Lindsay Lohan have we’ve seen such a public bundle of messy contradictions”.
- The central banks are doing their darndest to inflate assets and because of that U.S. stocks are growing to record highs.
- Commodities are wilting and betting on deflation has become profitable.
- Manufacturing has slowed and factory orders had their biggest decline in April for the last 7 months.
- Based on the stock market’s opinion of where we should be the cyclical trade should be working and interest rates should be rising, but neither are happening.
- Home values are rising and housing starts improving.
- Private construction is growing fast enough to counter declining public construction.
- People are buying retail products but not the large durables.
Business Insider says, “Its one thing to see profits rise as revenues rise. It’s another to see profits rise and revenues fall, which precisely what’s happening in America’s largest corporations.” Profits are rising because of fatter profit margins and stock buyback programs. At issue are unsustainable profits because workers have been cut or pressed to produce more at the same pay. Sooner or later the large corporations need customers to start buying more.
We are still looking a long term mediocre recovery.
However, when taking a look at the rest of the world, the United States is doing much better. Even China is losing its luster. Once growing at 15-20% per year, they are now in the 9% range. At least we have been and will grow 2-3%. Most other developed countries can’t say that. In fact many of them are in recession.
The Federal Reserve has been pumping in about $85 billion a month into the stalled economy. While good for the stock market, the day must come when the artificial stimulus stops and real value has to pay off the debt. Appears that day may be soon upon us. The Fed is telling the street that plans are being made to stop the bond buying program. Officials are focused on clarifying the program enough so Wall Street doesn’t overreact and send stocks plummeting. Let us hope they are successful.
Certainly you’ve heard a lot about gold the past few years. The argument is gold possesses real value, where our nation’s fiat money is just a promise to pay. Why in all this uncertainty did gold prices slip then tumble last month? No plausible answer seems to be appearing. When people lose confidence in their government and paper money they buy gold. For now it seems many like other investments a little better.
Wall Street is waiting for the “Great Rotation”. That’s the day when investments into stocks overtake investments into bonds. Stock investment has been growing since January, ending 20 straight months of declining of cash outflow. The growth has amounted to $18.4 billion more money in stocks now.
But, the bond market in the same time has seen $69 billion of money flowing into it. Dwarfing the investment in stocks. Retail investors still prefer bonds over stocks. Perhaps they are still scared from the twice lived 50% drop-offs witnessed in the last 10 years. Appears the Great Rotation is not yet at hand.
For a variety of reasons, there is still life in this recovery. Leading indicators signal more growth ahead.
- Fed stimulus programs are still with us. (But may be coming to an end)
- Employment is rising, slowly but dependably.
- Banks are flush with cash and trying to lend. (Even under the strangling new rules)
- Retail sales continue to rise.
- Construction is growing. Especially private construction.
- Deficit spending continues. (Not good for long term, but helps today)
2013 is said to be another year with a 2-3% growth rate.
2014 is less clear. A growing cadre of foreword thinking economists are saying we will see a recession or slow down for 2014. Why a slowdown? Because it’s due. This will be a cyclical consumer lead recession that amounts to a pause in the action while consumers adapt to a host of changing conditions. There are few mechanical issues that may need fixed as well.
- Possible bond and stock bubble
- Food, fuel, and rent inflation
- Ongoing high unemployment
- Stagnant wage growth
- Higher payroll taxes
- New Affordable Care Act taxes
- Unclear deficit reduction plan
Some sectors of our economy will weather this slowdown rather well. One of them that effects the Green Industry is construction.
Construction tends to take a long term view. Companies building a new plant or people building a new home rarely stop because of a short term slow down. We saw this in the 2000 recession when our industry cruised through almost untouched.
Key is to tie your business to sectors that will resist the recession. Construction is an obvious for us. But if possible look at healthcare and energy too. Any of the “must-haves” will not be much affected. They include food, water, medical, energy, security, and alcohol.
For our region the oil and gas fracking business will be huge. You don’t have to be directly involved, although there are some opportunities for landscapers to do reclamation work. All the support businesses will be benefiting and buying Green Industry services. A quick view around Pittsburgh and eastern Ohio tells that story. Business will blossom wherever fracking is in play.
What to think? These are not my predictions, I’m not near smart enough, but they represent the work of those I have found to be very accurate over the years.
- 2013 will be a year much like 2012. You got growth so take advantage of it.
- 2014 will level off with a slight positive or possibly a slight negative growth rate.
- 2015 will begin a 3-5 year growth period.
