A U.S. economy that already had several telltale signs of a possible recession has now likely entered one for sure, thanks to the COVID-19 pandemic, green industry economist Dr. Charlie Hall told listeners at a Monday webinar presented by AmericanHort and the Nursery and Landscape Association Executives (NLAE).
“Our economy was functioning, we’ve had a major bump in the road, we’ve likely entered a recession, but it doesn’t mean an end to our industry,” Hall said. “Our industry provides the answers to many societal needs and we need to emphasize that.”
Last year in his Farwest Show keynote address, Hall had predicted a 40% chance of a recession in 2020 and an 80 percent chance in 2021. At the time, he said six possible factors could trigger it — an economic bubble, an out-of-the-blue major (“black swan”) event, trouble with monetary policy, trade war effects, OPEC reneging on its output deal, and/or recession in China or Europe.
Four of the six have now happened, he said Monday, with the pandemic being the unpredicted black swan event that has upended everything. Recovery is going to depend on how quickly the novel coronavirus is under control.
“We hear one thing from the administration and one thing from the medical authorities as to how long that would take,” Hall said. “Most of the medical authorities say it would take 12–18 months. You tell me when COVID-19 will be under control and I’ll tell you how long the economic impacts are going to be.”
The outbreak so far is disrupting supply chains, putting people out of work, reducing consumer confidence along with consumer spending, and causing demand spikes for certain economic sectors, he said. Some sectors of the economy, such as housing, healthcare, food/beverage, pharmaceuticals and communication services, are resilient. The lawn and garden sector is part of the recreation services category, which is not resilient, but it will depend where consumers decide to cut back.
“There’s going to be some areas where the consumer has some budget relief and chooses not to spend,” Hall said. “The question is whether lawn and garden is one of them.”
Even within the green industry, the economic downturn will affect some sectors more than others. “The [economic] outlook changes depending on the subsector that we’re talking about,” Hall said. “This is not a gloom and doom for the entire industry, but there are opportunities.” In the retail marketplace, big box stores may see more consistent sales. Still, the ability of local garden centers to provide deliveries or pickups is a commendable service that customers will value.
“We need to spread the word about the health and well-being of plants for all citizens, regardless of ethnicity or socioeconomic status, in all economic conditions,” Hall said. “We’re in a health crisis, and most people don’t realize plants provide these health and well-being benefits.”
The industry can expect some of their employees to become infected with COVID-19 in the immediate future. Hall advised growers to document the financial impact the epidemic is causing your business. Record everything that happens in case safety net programs become available, and businesses need to provide documentation before receiving benefits.
Businesses are also wise to identify susceptible, critical functions of their operation, and risks that impact their supply chain. It is also wise to defer major decisions until quarterly data is available to support tactical movements. Lastly, business owners need to build flexibility into their labor, supplies, and delivery expectations while also exploring growth opportunities.
Stream the full seminar online on the AmericanHort website, and download the presentation slides for review.