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Economic Corner: An Update on Key Economic Factors Impacting the Green Industry
Several U.S. economic indicators can provide insights on what green industry firms may expect in the upcoming year. Key economic indicators include the Gross Domestic Product (GDP), Leading Economic Index (LEI), and housing starts. Here, all three indicators are covered and what they may imply for the upcoming year for green industry firms.
The U.S. GDP is an indicator of the overall health of the economy. Since rebounding after the 2020 Covid pandemic, the GDP has been relatively stable, coming in at 3.1% in the third quarter of 2024 (Figure 1). The GDP was bolstered in late 2024 by an increase in consumption of goods, spending on services, fixed investments, and equipment investments. Conversely, there were declines in structural and residential investments.
The LEI incorporates ten economic indicators and demonstrates the direction of the economy. A downward trend in the LEI is a recession indicator while an upward trend indicates economic growth. At the end of 2024, the LEI trended upward further away from recession signals and slowed slightly in December due to lower consumer confidence, weak manufacturing, increased unemployment, and fewer building permits (Figure 2). However, the other economic indicators were positive which offset any major declines. Furthermore, U.S. unemployment rates were at 4.1%.
Of particular interest to the green industry, U.S. housing starts often align with ornamental plant sales and landscape projects. Throughout 2022 and some of 2023, U.S. housing starts trended downward partially due to increased interest rates and inflation concerns. Through 2023 and 2024, inflation concerns dissipated, and interest rates stabilized between 6-7%. As of January 2025, U.S. 15-year mortgage rates were at 6.16% while the 30-year mortgage rates were at 6.96% (Trading Economics, 2025). Partially attributed to these trends, housing starts increased by 15.8% between November and December 2024, to 1,500 million units in the U.S. (Figure 3). In the southern U.S. (including Tennessee), housing starts increased by 17.7% to 853,000 units in December.
Overall, both the GDP and LEI demonstrate the economy is in relatively good shape as of December 2024. The housing market is still an area that can go either way. Currently, an increase in housing starts indicates that the U.S. economy is headed in a growth direction. This trend implies that plant sales and demand for landscaping projects should continue to grow. However, as house prices increase (median=~$427,000) and if mortgage rates also increase, consumer demand will respond and ultimately impact plant sales. In the current market, plant sales are likely to be like what was observed in 2024 rather than in the years closer to the pandemic. Given the state of the economy today, the housing market is going to be a key indicator of the green industry’s performance in 2025. If you are interested in staying up to date with these economic indicators, the www.tradingeconomics.com website provides the GDP, housing starts, and many other indicators. The LEI is available at www.conference-board.org.
