Consumer confidence is climbing

The Conference Board Consumer Confidence Index™, which had posted a slight increase in March, improved considerably in April. The Index now stands at 39.2 (1985=100), up from 26.9 in March. The Present Situation Index increased to 23.7 from 21.9 last month. The Expectations Index rose to 49.5 from 30.2 in March.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer Confidence rose in April to its highest reading in 2009, driven primarily by a significant improvement in the short-term outlook. The Present Situation Index posted a moderate gain, a sign that conditions have not deteriorated further, and may even moderately improve, in the second quarter. The sharp increase in the Expectations Index suggests that consumers believe the economy is nearing a bottom, however, this Index still remains well below levels associated with strong economic growth."

Consumers' appraisal of present-day conditions improved moderately in April. Those claiming business conditions are "bad" declined to 45.7 percent from 51.0 percent, while those claiming business conditions are "good" increased to 7.6 percent from 6.9 percent. Consumers' assessment of the job market was somewhat mixed. The percentage of consumers stating jobs are "hard to get" decreased to 47.9 percent from 48.8 percent in March, however, those saying jobs are "plentiful" edged down to 4.5 percent from 4.7 percent.

Consumers' short-term outlook improved significantly in April. Those anticipating business conditions will worsen over the next six months declined to 25.3 percent from 37.8 percent, while those expecting conditions to improve increased to 15.6 percent from 9.6 percent in March.

The employment outlook was also considerably less pessimistic. The percentage of consumers anticipating fewer jobs in the months ahead decreased to 33.6 percent from 41.6 percent, while those expecting more jobs increased to 13.9 percent from 7.3 percent. The proportion of consumers anticipating an increase in their incomes edged up to 8.0 percent from 7.8 percent.

The media is using the other "r" word

THE ECONOMIST -- The world has been suffering a bleak economic winter. Yet some say that they see early signs that the chill of recession is giving way to spring. For many commentators, a hunt for the green shoots of recovery is on. Search among a selection of British and American newspapers, for example, and mentions of “green shoots” in articles about the economy have increased enormously in the past couple of months. The earth was barren in the six months or so after the collapse of Lehman Brothers, but newspapers have, with the onset of northern hemisphere spring, started to find the confidence to discuss recovery. In the past, mentions of the word recession (as mapped in an “R-word” index) have been a useful indicator of the likelihood of the real thing. Could the same be true of a green-shoots index and the likelihood of economic recovery?

Likewise, the news reference volume for the terms "Great Depression" and "worst economy" have both dropped to almost zero recently, according to Google Trends:

Mortgage rates fall again to 4.80%

According to data released today by Freddie Mac, 30-year mortgage rates fell this week to 4.80%, from 4.82% last week and 4.87% the previous week. Except for the 4.78% average during the first week of April, the 4.80% rate marks the lowest 30-year mortgage rate in history (see chart above), and is a full 4 percentage points below the 8.80% average rate since 1964. Along with falling home prices, the record-low mortgage rates are continuing to elevate housing affordability to record highs, which will help the real estate market in its recovery process this year.

Strong showing of capital goods orders

According to data released today from the Department of Commerce, orders for non-defense capital-equipment goods excluding aircraft rose 1.5% in March after a 4.3% gain in February. Such core capital-goods orders are considered the best gauge of capital spending by businesses, and are also considered a leading economic indicator. The two-month increase of 5.8% in new orders for capital goods was the strongest two-month gain in more than four years, since the 6.5% two-month increase for December 2004 and January 2005.

Latest USDA-NASS Floriculture Crops report released

Highlights from the latest Floriculture Crops report:

The 2008 wholesale value of floriculture crops is down 2 percent from the revised 2007 valuation. The total crop value at wholesale for the 15-State program for all growers with $10,000 or more in sales is estimated at $4.22 billion for 2008, compared with $4.32 billion for 2007. California continues to be the leading State with crops valued at $1.02 billion, but is down 2 percent from the 2007 value. Florida, the next largest producer, is down 5 percent from the prior year to $922 million in wholesale value. These two States account for 46 percent of the 15-State total value. For 2008, the top 5 States are California, Florida, Michigan, Texas, and North Carolina, which account for $2.80 billion, or 66 percent, of the 15-State total value.

The number of producers for 2008, at 7,189, is down 3 percent in the 15 States compared with the revised 2007 count of 7,387. The number of producers with sales of $100,000 or more dropped 5 percent to 2,967 for 2008 from 3,136 in 2007.

In the 15-State program, total covered area for floriculture crop production was 729 million square feet, 5 percent less than the revised 2007 figure. Greenhouse space for 2008, at 414 million square feet, is down 2 percent from 2007. This accounts for 57 percent of the total covered area. Shade and temporary cover is down 8 percent, to 314 million square feet. Open ground totaled 33,150 acres, 5 percent less than the revised 2007 total.

The average peak number of hired workers employed on operations in the 15-State program in 2008 is 17.0, down 1 percent from a revised 17.2 in 2007. A total of 5,313 operations hired workers during 2008, compared with 5,460 a year earlier. Overall, 74 percent of operations used some hired labor during 2008, the same as in 2007.

Click here for the full report.

Value of Home Gardening

Findings from the National Gardening Association’s (NGA) new survey, The Impact of Home and Community Gardening in America, confirm that food gardening in the U.S. is on the rise. Seven million more households plan to grow their own fruits, vegetables, herbs, or berries in 2009 than in 2008 — a 19 percent increase in participation. This anticipated increase is nearly double the 10 percent growth in vegetable gardening from 2007 to 2008 and reflects the number of new food gardeners emerging this year.

More Americans are recognizing the benefits of growing their own produce, including improved quality, taste, and cost savings. In 2008, gardeners spent a total of $2.5 billion to purchase seeds, plants, fertilizer, tools, and other gardening supplies to grow their own food. According to NGA estimates, on average a well-maintained food garden yields a $500 return when considering a typical gardener’s investment and the market price of produce.

Click here to download and read the full report.

Reminder: Shine in '09 Webinar #2

As a reminder from my earlier post (click here), you still have a few days left to register for the second webcast in our Shine in '09 webinar series.

FYI -- The recording from the first webinar is on the Ellison Chair website (click here). As you will recall, the topic of the first webinar was "Action Points to Survive the Downturn" and was presented by yours truly.

The next webinar in the series is next week!

Tuesday, April 14, 2009 - 11:00 a.m. CDT
Webinar 2 Topic: Differentiating By Being Sustainable
Dr. Don Wilkerson, Texas A&M AgriLife Extension
Being proactive by developing your own sustainability code of ethics can help set you apart from the competition!

FYI -- the final webinar in the series will be held on May 12, 2009 - 11:00 a.m. CDT. Dr. Jennifer Dennis of Purdue University will present webinar 3 which is titled "Marketing Green! The "green" marketing strategies you need to thrive in a maturing marketplace!"

If all of this sounds interesting, click here to register! And, and one more thing, there's no charge for this webinar series, thanks to our great sponsors!

Upcoming challenges

Click on image to enlarge. Source: Bill Conerly.

Three tips for cost cutting

Almost all companies have or will need to cut costs to survive in the current environment. Unfortunately, not all cost cutting is done smartly. Consider these three pieces of advice before making cuts:

1. Put strategy first. Cuts across the board rarely, if ever, lead to effective results. Laying out strategy first helps you decide where to cut, and also helps employees accept the cuts as a step toward a goal.
   
   
2. Focus on good customers. Rather than cutting valued services to valuable customers, "fire" high-maintenance customers who cause you unnecessary complexity. Focus on serving your more cost-effective customers who are happy with your products and services as they are.
   
   
3. Keep your business simple. In a healthy economy, it's easy to overlook processes and activities that are redundant or overly involved. Simplifying them can save you money with the added bonus of increasing both customer and employee satisfaction.

Recession ending this year?

According to the New York Fed, "Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future real economic activity."

On Tuesday, the New York Fed released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through March 2009, and the Fed's recession probability forecast through March 2010 (see chart above, click to enlarge). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (currently at 2.61%) to calculate the probability of a recession in the United States twelve months ahead (see chart below of the Treasury spread).

The Fed's data show that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then to less than 10% for December 2008 and January 2009. Looking forward through 2009, the Fed's model shows a recession probability of only about 1% on average through the next 12 months, and below 1% by the end of the year (0.82% in December 2009). By March of 2010, the recession probability will be only 0.53%, close to the lowest level since mid-2005.

Further, the Treasury spread has been above 2% for the last 12 months, a pattern consistent with the economic recoveries following the last six recessions (see chart above).

Can Google search trends predict economic activity?

Yes, according to Google economist Hal Varian:

Can Google queries help predict economic activity? The answer depends on what you mean by "predict." Google Trends and Google Insights for Search provide a real time report on query volume, while economic data is typically released several days after the close of the month. Given this time lag, it is not implausible that Google queries in a category like "Automotive/Vehicle Shopping" during the first few weeks of March may help predict what actual March automotive sales will be like when the official data is released halfway through April.

Our work to date is summarized in a paper called Predicting the Present with Google Trends. We find that Google Trends data can help improve forecasts of the current level of activity for a number of different economic time series, including automobile sales, home sales, retail sales, and travel behavior.

Here's an excerpt from the paper's introduction:

Google Trends provides daily and weekly reports on the volume of queries related to various industries. We hypothesize that this query data may be correlated with the current level of economic activity in given industries and thus may be helpful in predicting the subsequent data releases.

We are not claiming that Google Trends data help predict the future. Rather we are claiming that Google Trends may help in predicting the present. For example, the volume of queries on a particular brand of automobile during the second week in June may be helpful in predicting the June sales report for that brand, when it is released in July.

Parable update...

If you recall my previous post regarding the "Parable of the Man Who Sold Hot Dogs," then you'll appreciate this real-life example of a man and his family creating their own stimulus package!

Click here for the full story.

Hat Tip to J.R. Marker, III for the link.

Which companies bounce back faster post-recession?

I thought the following research was interesting given all of the talks I have been give lately about developing a compelling value proposition:

Companies that concentrate on their core business dramatically improve their odds of success in a downturn. About 95% of the companies that qualify as "sustained value creators" — those that maintained at least a 5.5% real growth rate in revenue and profit over ten years while earning back their cost of capital — are leaders in their core businesses. They not only perform better during expansions but recover faster when growth rebounds from an economic slump.

During the last recession, for example, the average net profit margins of this group bounced back to 6.5% in 2002, only slightly below pre-recession levels in 2000. Their competitors fared much worse, with average net profit margins falling to around 1% during the same period, a drop of about 3 percentage points.

Source: Bain & Company -- click here.

New I-9 Form Available

US Citizenship and Immigration Services (USCIS) has announced that the new I-9 employment eligibility verification form must be used as of April 3.

Click here to read the U.S. Citizenship and Immigration Services (USCIS) press release.

Click here to download the new I-9 form.

Have we hit a bottom in housing?

There have been some glimmers of light in the darkening economic picture, including retail sales for January and February and sales of both new and existing homes in February. It’s clear that ongoing market adjustments in key sectors are essential to eventual economic recovery and expansion.

The policy blitz coming from the Administration, Congress, the Federal Reserve and foreign policymakers certainly are helping to move the train down the track toward the recovery tunnel — and the light at the other end should be in view soon.

This economic recovery pattern cannot materialize without near-term stabilization of the housing sector, and let's hope recent policy initiatives to help housing turn that corner.

Housing pundits are forecasting a bottoming for home sales in the first quarter of this year, a bottom for total and single-family housing starts in the second quarter, and a bottom for the residential fixed investment component of GDP in the final quarter of 2009.

National average house prices should stabilize within a few quarters, and the majority of the decline may now be behind us.

Yesterday, Diane Swonk released her housing market forecast on a particularly encouraging note. Click here for more.

Make your email count

Given the number of emails you send every day, you should be an email-writing expert, right? In case not, here are a few tips for effective messaging:

1. Ask for something. All business writing includes a call to action. Before you write your email, know what you're asking of your audience.
2. Say it up front. Don't bury the purpose of your email in the last paragraph. Include important information in the subject line and opening sentence.
3. Explain. Don't assume your reader knows anything. Provide all pertinent background information and avoid elusive references.
4. Tell them what you think. Don't use the dreaded "Your thoughts?" without explaining your own. Express your opinion before asking your reader to do the same.

Source: Management Tip of the Day, Harvard Business Publishing