ETSU Bureau of Business and Economic Research

Tri-Cities Retail Sales Report

East Tennessee State University + Second Quarter 2006 + College of Business and Technology

THE TRI-CITIES

Sales performance remained erratic in the Tri-Cities during the spring months as all three cities saw changes in retail activity. In Johnson City, retail sales increased 4.8% to $414 million, followed by Kingsport with 4.0% growth to $318 million, and Bristol where sales revenues were up 3.7% to $246 million. Adjusted for inflation, sales volume during the April to June quarter increased 0.8% in Johnson City, remained flat in Kingsport, while falling 0.3% in Bristol.

 BRISTOL TN-VA JOHNSON CITY KINGSPORT 
 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 2000 947.6 -0.8 1317.1 3.8 1108.1 -2.2
 2001 929.9 -1.9 1412.4 7.2 1130.7 2.0
 2002 929.7 -0.0 1458.0 3.2 1138.9 0.7
 2003 933.7 0.4 1449.2 -0.6 1197.3 5.1
 2004 969.8 3.9 1519.4 4.8 1214.7 1.4
 2005 1007.0 3.8 1631.0 7.4 1245.6 2.6
 02:1 224.3 8.3 342.9 8.9 265.8 3.3
 02:2 218.9 -9.5 370.1 8.9 282.8 0.0
 02:3 237.9 8.4 347.7 -0.1 274.4 -1.5
  02:4 248.5 -5.0 397.3 -3.0 315.8 1.2
 03:1 211.8 -5.6 318.5 -7.1 285.7 7.5
 03:2 206.9 -5.5 349.3 -5.6 280.0 -1.0
 03:3 239.5 0.7 364.3  4.8 287.2 4.7
 03:4 275.6 10.9 417.1 5.0 344.4 9.1
 04:1 230.4 8.8 340.6 6.9 266.1 -6.9
 04:2 219.9 6.3 373.3 6.9 303.8 8.5
 04:3  246.1 2.8 371.9 2.1 292.3 1.8
 04:4 273.4 -0.8 433.5 3.9 352.4 2.3
 05:1 226.2 -1.9 377.9 11.0 280.6 5.5
 05:2 237.1 7.8 394.8 5.8 305.6 0.6
 05:3 252.6 2.6 397.3 6.8 302.7 3.6
 05:4 291.2 6.5 460.9 6.3 356.6 1.2
 06:1 250.2 10.6 387.7 2.6 294.2 4.8
 06:2 245.8 3.7  413.8 4.8 318.0 4.0

THE METROPOLITAN AREAS

The Tri-Cities Combined Statistical Area (CSA) saw only a modest increase in sales performance during the second quarter. Over the spring months, dollar sales grew 4.3% on a year-to-year basis to reach $1,499 million. However, adjusted for inflation, retail activity in the Tri-Cities CSA was only 0.3% above same period in 2005.

Nearly all of the counties in the region did report small improvements in retail activity. Higher dollar sales and sales volume were reported by six counties: Unicoi, Scott, Washington (VA), Carter, Washington (TN), and Sullivan. Dollar sales and volume were lower in Hawkins County.

 TRI-CITIES CSA  KNOXVILLE MSA CHATTANOOGA MSA
 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 2000 5100.3 0.9 9168.1 2.7 5686.4 1.9
 2001 5178.3 1.5 9212.2 0.5 5739.7 0.9
  2002 5293.0 2.2 9369.7 1.7 5699.3 -0.7
 2003 5308.3 0.3 9613.5 2.6 5708.0 0.2
 2004 5509.4 3.8 10037.5 4.4 6001.4 5.1
 2005 5742.5 4.2 10751.7 5.3 6274.1 4.5
 02:1 1246.9 7.1 2155.1 3.5 1360.0 3.4
 02:2 1337.7 2.6 2394.6 4.7 1448.5 -2.1
 02:3 1322.1 3.1 2337.8 1.7 1418.5 0.3
 02:4 1386.3 -2.9 2482.2 -2.5 1472.3 -3.8
 03:1 1215.1 -2.6 2140.4 -0.7 1298.8 -5.2
 03:2 1290.9 -3.5 2392.8 -0.1 1421.4 -1.9
 03:3 1353.1 2.3 2463.0 5.4 1452.1 2.4
 03:4 1449.2 4.5 2617.4 5.5 1544.7 4.9
 04:1 1248.8 2.8 2317.8 8.3 1400.5 8.6
 04:2 1371.3 6.2 2492.7 4.2 1493.5 5.1
 04:3 1382.8 2.2  2492.6 1.2 1496.9 3.1
 04:4 1506.4 4.0 2734.4 4.5 1610.6 4.3
 05:1 1312.8 5.1 2365.3 2.1 1460.4 4.3
 05:2 1436.9 4.8 2637.4 5.8 1563.3 4.7
  05:3 1451.5 5.0 2653.7 6.5 1584.4 5.9
 05:4 1541.2 2.3 2915.3 6.6 1666.0 3.4
 06:1 1378.5 5.0 2553.9 8.0 1524.6 4.4
 06:2 1499.0 4.3 2867.5 8.7 1651.9 5.7

Retail growth remained strong in the other metro areas of East Tennessee during the second quarter. On a year-to-year basis, Knoxville MSA retail sales increased by an impressive 8.7% to $2,868 million, while Chattanooga MSA retail sales grew 5.7% to $1,652 million. Adjusted for inflation, sales volume increased 4.5% in Knoxville and 1.6% in Chattanooga.

UNITED STATES AND TENNESSEE

 UNITED STATES TENNESSEE 
 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 2000 3,294,217 6.5 65,230 3.2
 2001 3,385,577 2.8 65,235 0.0
 2002 3,466,136 2.4 66,387 1.8
 2003 3,615,170 4.3 69,008 4.0
 2004 3,849,748 6.5 72,527 5.1
 2005 4,115,815 6.9 77,544 6.9
 02:1 795,820 2.0 15,241 0.8
 02:2 875,457 1.8 16,711 0.6
 02:3 878,024 4.8 16,767 3.4
 02:4 916,835 1.0 17,668 2.2
 03:1 821,949 3.3 15,515 1.8
 03:2 908,210 3.7 17,240 3.2
  03:3 921,644 5.0 17,669 5.4
 03:4 963,367 5.1 18,585 5.2
 04:1 882,938 7.4 16,701 7.7
 04:2 964,630 6.2 18,153 5.3
 04:3 969,154 5.2 18,268 3.4
 04:4 1,033,026 7.2 19,404 4.4
 05:1 931,049 5.5 17,647 5.7
 05:2 1,038,838 7.7 19,315 6.4
 05:3 1,050,046 8.4 19,626 7.4
 05:4 1,095,882 6.1 20,957 8.0
 06:1 1,007,395 8.2 18,745 6.2
 06:2 1,110,806 6.9 20,542 6.4

Retail performance continued to be strong in the United States and Tennessee during the spring quarter. Nationally, dollar sales increased 6.9% to $1,111 billion, while sales volume increased by 2.8%. Adjusted for inflation, U.S. retail sales have now increased for fourteen quarters in a row. In Tennessee, retail sales reached $20.5 billion, a 6.4% increase on a year-to-year basis. Sales volume was 2.2% above 2005 levels, marking the thirteenth consecutive quarter of real growth.

ANALYSIS

The national and state retailing pictures continue to reflect the favorable economic trends that have dominated the economic news since 2003. As noted in the last report, the U.S. is in the midst of the expansion phase of the business cycle, where we can enjoy a period of several years of stable economic growth. This situation should not change anytime soon – a downturn is unlikely in the near future.

Retail activity in the Tri-Cities area has also increased, but the pattern of growth has been erratic and overall has been slower than in the state and in the nation. Consumer confidence in the region continues to be affected by some of the imbalances that have emerged in the local labor market. These mixed conditions will continue to influence retail trade into the summer and fall months.

The economic landscape was little changed in the second quarter. The focus of business executives, political leaders, and economic policy makers continued to be Fed watching on interest rates and concerns about the stability of the energy supplies from the Middle East. For the moment, the Federal Reserve System has suspended its drive to increase short term interest rates, and the oil continues to flow into the world petroleum markets.

The Fed remains very concerned about inflationary pressures linked to higher oil prices and a tighter labor market. The level of inflation continues to creep higher and now exceeds four percent per year (using the consumer price index). The Fed has made it very clear that it will resume the upward march in short term interest rates if the inflation rate does not moderate.

Petroleum prices continue to be higher than a year ago, and are probably going to drift higher over the near future. If the rise in oil prices remains orderly and moderate, this will not disrupt the business expansion. But, if there is some event which restricts oil production in the Middle East, then higher prices and an economic slowdown are more likely to occur.

Technical Note. This report was prepared in September 2006. The “Retail Sales” figures used in this report are “Retail and Food Service Sales” which is the total of sales in NAICS Sector 44, Sector 45, and Subsector 722. The national retail sales estimates are issued by the U.S. Census Bureau. The state, region, county, and city retail sales estimates are based on state sales tax collections and are benchmarked to the 2002 U.S. Census of Retail Trade. The Consumer Price Index (CPI) from the U.S. Bureau of Labor Statistics is used to adjust the dollar value of retail sales into "real" or volume terms where the effects of price inflation are removed. The sales data are not adjusted for seasonality so comparisons should be made on a year-to-year basis. All dollar figures in the retail sales tables are in millions of dollars.

Data Note. The retail sales data used in this report are not comparable with the data used in this report series through 2005. Please see the retail sales report for the first quarter of 2006 for an extended discussion of the data changes.

More information. This report was prepared by Dr. F. Steb Hipple, Professor of Economics, and Research Associate, BBER. For more information, please contact Dr. Hipple c/o Department of Economics, Finance, Geography, and Urban Studies, Box 70686, East Tennessee State University, Johnson City, Tennessee 37614. Phone/Voicemail: 423-439-5304. Fax: 423-439-8583. E-Mail: Hipples@ etsu.edu. Website: http://faculty.etsu.edu/hipples.