Good day from the Wizard,
On November 30th, the Dow was up 737 points, the GDP was up 2.9% annually (as of the last quarter’s government revision), and it looked like Black Friday and Cyber Monday sales were strong. 197 million shoppers engaged in spending last weekend.
On another note, let’s talk about the ISM index. The ISM manufacturing index, also known as the purchasing managers’ index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. It is considered a key indicator of the state of the U.S. economy.
The Manufacturing ISM Report on Business® is released on the first business day of the month at 10:00 a.m. (EST). Today, the US ISM Manufacturing Supplier Deliveries Index is at a current level of 46.80, down from 52.40 last month and down from 75.60 one year ago. This is a change of -10.69% from last month and -38.10% from one year ago. This is probably the goal of the Fed—to slow down the economy and reduce inflation.
This is why Powell will probably only raise the interest rate by 50 basis points. Sales are definitely slowing. Inflationary pricing must be restrained, especially in a category like flowers. We cannot price ourselves out of the market.
Inflation is starting to wane a small amount. The national gas average is ticking down slightly. The number of job openings is going down ever so slightly. What does this mean for the flower industry? One thing that we know for sure is that the great sales and profit numbers of 2021 have not repeated themselves in 2022, especially in the last two quarters. The labor issue as well as supply chain issues have also eased greatly. The air freight industry has switched back to almost normal as space is much more readily available. Rates have not dropped a lot as jet fuel is still on the high side. Diesel fuel is still on the high side, causing trucking rates to not drop as much as expected as demand is down slightly. The biggest drop in logistic pricing is on ocean containers. Ports are not backed up, and ocean freight is moving smoothly. The real monkey wrench in the system is what would have happened if there had been a Rail strike but that looks like it has been thwarted.
We see e-commerce slowing and an increase in shoppers going back to in-store shopping. Unit sales in the flower sector seem to be down. Sales dollars are probably flat or slightly down due to higher unit prices. The most important item is controlling costs and maintaining your profit margin.
Florists are very concerned that day-to-day sales are down, and even though we are not in a recession, it feels like it for some. Inflation lingers on, and high prices may be why sales are slowing in the floral sector. Corporate budgets are not growing, so some large purchases from florists are being reduced. Most of Europe is in recession, and inflation is at a higher rate than in the United States and Canada. The Russia/Ukraine conflict continues to influence the world, especially Europe. Natural gas prices are causing many European growers to scale back. Strong dollar issues continue to influence shippers to favor the US market.
Valentine’s Day and Mother’s Day will be here before we know it. Growers have been slow to put out prices as the freight costs and other cost factors are not exactly clear. Also, the size of the rose pinch is not known. With the situation in Russia and the Ukraine, it is possible that fewer roses were pinched due to the challenge of women’s day demand with a war going on. We are not seeing shortages of roses currently, which could be a factor of a smaller pinch, a pure lack of demand, or both. (Take your pick.)
Weather has been an issue, especially in Colombia. It has rained almost every day this year in Colombia, and yet there is still more than enough supply currently.
Last month, the day I wrote this column, the Dow went up 828 points. As I mentioned in the first part of this article, it was up 737 points yesterday when I wrote this month’s version. Maybe I should start writing this every day. Lol!! Let’s hope brighter things are coming and we have a “Santa Claus Rally.”
As always, thanks for reading my rants,
Here are a few links to some logistics and economic news that may be helpful!