And now for some thoughts from the Wizard on some of the current economic, logistic problems, political and global issues, and climate situations that may impact you and your Floral business.
Mergers and Acquisitions
In many industries we are seeing a lot of activity with mergers and acquisitions. The Floral industry worldwide seems to be no different.
Congratulations to The Delaware Valley Floral Group on their most recent acquisition of Zieger and Sons. For more about this please see this Link to Floral Daily for more details.
Major Hurricanes
In October we had two major Hurricanes which caused 100’s of Billions in damage.
These storms were some the most damaging in history including the loss of lives.Milton came right after Helene, which probably alone will have caused over $200+ Billion in damage and future economic losses. The two Hurricanes could distort upcoming economic reporting including Jobs and GDP reports.Logistics during and after Hurricane Milton resulted in 10 ports being closed. Logistic companies stepped up to the plate and helped get aid to hard hit areas from both hurricanes. Fed Ex as well as other logistic companies helped relief organizations aid Hurricane victims. We have seen images of Floral transportation companies and wholesalers sending needed supplies to inflicted areas.
Here are two links to some floral related issues with damage from the hurricanes:
Significant closures caused by flooding from Hurricane Helene remain on interstates 26 and 40 on both sides of the North Carolina/Tennessee border, placing problems on routing software that steers truckers clear of roadways that aren’t available to them. While there are still hundreds of other road closures in both states, from U.S. highways down to small state roads, the status of the two key interstates serving the western North Carolina and eastern Tennessee region remains mixed.
These two hurricanes will disrupt labor markets, construction supply prices, consumer spending, insurance costs, food and energy pricing and more.
Extreme weather has become more frequent. The storm of the century is more often than once a century. Businesses are being affected by more property damage than ever. As a business owner you want to improve building codes, infrastructure, and protect your property so losses are reduced and already high insurance costs don’t continue to spiral.
Consumers, Growth, and DistributionInflation has been moderating and the fed has started an easing cycle. Inflation has eased since it’s high in mid 2022. Unfortunately many prices have remained high frustrating consumers. Fortunately wages have outpaced price growth. There is still a feeling that purchasing power is lower especially among lower income segments of the population.
US consumer confidence surged in October by 9.5 points to reach 108.7, its strongest showing since the beginning of the year,(6 month high in consumer sentiment in October) per the Conference Board. The current availability of jobs has increased and produced better labor market conditions.
“Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data,” says Conference Board chief economist Dana Peterson.
Fewer companies are passing increased costs to consumers, according to a National Association for Business Economics survey. The share of survey respondents reporting that their companies are offloading some of their cost increases onto customers dropped to 54% from 67% in a July survey by National Association for Business Economics
Retail sales increased in September 2024. The economy has stayed strong mostly driven by strong consumer spending. According to Citibank “consumers continue to spend in the aggregate.”
Consumer defaults are increasing and credit card and auto loan delinquencies have increased modestly! Hopefully this does not increase in a big way and weaken the consumer spending that is driving the economy.Overall spending remains strong. There are some slowing trends on autos, household durables and dining out at restaurants.and even in discretionary services spending.
The US economy(GDP) grew at an annualized rate of 2.8% in the third quarter, driven in part by consumer spending, according to the Commerce Department. The gain was slightly below the 3% recorded in the second quarter. Personal consumption expenditures rose 3.7%, while federal spending surged 9.7%.
2024 Holiday sales are expected to increase by 8% according to mhl news.(please click on this link)Jobs, Wages, Strikes, and the Labor Market (more jobs available than people looking)
The Boeing strike has continued after the union rejected a 35% pay hike offer.
The labor market has been softening throughout 2024, but September’s Job growth increased indicating a stable labor market. Income gains are still on the positive side.Currently job openings are around 8 million down from the high of 12.2 million two years ago. The good news is that there are more jobs available than thenumber of unemployed looking for work. (6.8 million) With less jobs available there is a slight slowdown in hiring and jobs are a little harder to get.The Fed aimed to slow inflation by raising rates for the last 30 months. The Fed’s main concerns are the risks of inflation as balanced with the risks of high unemployment.
If inflationary pressures continue to be mitigated and labor markets are healthy, the Fed will likely lead policy rates to around 3%, in the view of most experts. If this is successful the likelihood of a recession is limited. Most experts feel the economy is on track so far.
The Federal Reserve’s recent interest rate cuts and easing inflation will boost construction activity and further stimulate the entire economy.
Equity markets continue to move higher. The S&P 500 has produced some incredible returns this year. The S&P 500 is up 20.1% year-to-date and up 36.4% over the past year. With inflation dropping a stabilizing easing cycle by the Fed is expected. Lower interest rates should help the Bull market and the economy.
Logistics
Ocean container shipping remains strong for 2024.
The Port of Long Beach saw record container volumes in September and in the third quarter due to high demand and some shippers going to the west coast because of possible strike coming to East Coast and Gulf Coast ports.
A big cargo backlog was a result of the port strike. East Coast and Gulf Coast ports resumed operations after dockworkers and port operators reached a wage agreement, ending a three-day strike that shut down shipping. The strike’s temporary settlement was earlier than anticipated, but clearing the backlog of container ships took two to three weeks causing delays. Dockworkers returned to work under a tentative agreement with the United States Maritime Alliance.
UPS projects more in-store shopping could dampen peak season shipping activity for them. The forecast suggests UPS doesn’t expect a surge of shipping during the current quarter, especially with management feeling there will be a slowdown in U.S. online sales and lower-than-expected global manufacturing activity.
UPS is increasing its hires to 125,000 due to a shorter peak season between Black Friday and Christmas. USPS is reducing its hires and FedEx has not yet announced its intentions.
Diesel prices decreased to $3.553 per gallon this week, a decrease of 7.8 cents per gallon, according to the Department of Energy/Energy Information Administration figures. The decline was the most significant since December 2023.
Air cargo has entered the busy season for international shipping. The last nine months have been very strong for the airlines. It is expected for this high volume to continue through the first quarter of 2025 when volume is usually slower after the holidays. Air cargo volume is up about 12% for 2024 over 2023 for the first 3 quarters. 2024 spot rates increased along with the increase in demand.
Tariffs (a new category for us)
The International Monetary Fund has warned against increased global protectionism. The possibility of higher tariffs in the US could hurt global growth.
Higher tariffs on foreign-made goods could dramatically slow consumer spending.
One of the presidential candidates states that the U.S. would bank billions of dollars in revenue from exporting countries paying those tariffs — a fundamental misunderstanding of how they work, say analysts and importers. “Tariffs are paid by the importer and not the producing country. This is inflationary as it is passed on to the consumer. It’s a tax paid by the consumer,” said Matt Shay, chief executive of the Washington-based National Retail Federation, the largest U.S. retail trade group. “Tariffs can be a useful temporary tool during trade negotiations, when used strategically and sparingly, to get benefits in a trade relationship.”
Potential Tulip Shortage
Many of you have heard about a possible tulip shortage in 2025. One of New Bloom Solutions and Above All Flowers close associate in Holland spoke with one of the biggest tulip producers in the world this week. Here is what we found out:
Tulip production will be off 25-30%. This grower in particular is short about 90 million bulbs.
- 2024 average prices fob Holland were about .15-.16 Euro cents per stem—we expect 2025 prices to be around .22-.23 per stem fob (about a 31% price increase)
- Growers are reluctant to take large orders in advance
- Major peak production is expected to start later and finish earlier (start third week of January and end third week of April) So very low production for Mother’s Day
- Because of heavy rains in bulb producing areas the bulb size on average is smaller than normal yielding more 20-23 gram tulips and less 30-35 gram tulips
- this could influence future tulip bulb production as it takes 3 years to generate better tulip bulbs
Please see this link from Produce News for more info on the Tulip story