ETSU Bureau of Business and Economic Research

Tri-Cities Retail Sales Report

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

THE TRI-CITIES

Sales performance improved in the Tri-Cities during the summer quarter with all three cities reporting positive growth. The dollar value of retail sales increased 6.1% to $268 million in Bristol, followed by Johnson City where sales grew 5.9% to $421 million, and Kingsport with sales revenues rising 3.6% to $314 million. Adjusted for inflation, sales volume during the July to September period increased 2.7% in Bristol, 2.5% in Johnson City, but only 0.2% in Kingsport.

 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
 06:3 268.0 6.1 420.9 5.9 313.5 3.6

THE METROPOLITAN AREAS

The Tri-Cities Combined Statistical Area (CSA) saw a modest improvement in retail activity during the third quarter. Over the summer months, dollar sales grew 3.9% on a year-to-year basis to reach $1,509 million. Adjusted for inflation, retail activity in the Tri-Cities CSA was 0.6% above same period in 2005 (compared to 0.3% in the previous quarter).

Unfortunately, the third quarter growth in retailing was concentrated in the three cities and the urbanized counties. Only two counties reported higher dollar sales and sales volume -- Unicoi and Sullivan Counties. Washington (TN) saw higher dollar sales but sales volume was flat. Dollar sales were higher but real sales were down in Washington (VA) and Carter Counties. Hawkins and Scott Counties saw lower levels of dollar sales and sales volume.

 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
 06:3 1508.8 3.9 2824.4 6.4 1645.8 3.9

The other two metro areas of East Tennessee saw higher retail sales during the third quarter. On a year-to-year basis, Knoxville MSA retail sales increased 6.4% to $2,824 million, while Chattanooga MSA retail sales grew 3.9% to $1,646 million. Adjusted for inflation, sales volume increased 3.0% in Knoxville and 0.5% in Chattanooga (compared to 0.6% in the Tri-Cities).

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 1,110,698 6.9 20,542 6.4
 06:3 1,103,555 5.1 20,527 4.6

Retail performance remained strong in the United States and Tennessee during the summer quarter. Nationally, dollar sales increased 5.1% to $1,103 billion, while sales volume increased by 1.7%. Adjusted for inflation, U.S. retail sales have now increased for fifteen quarters in a row. In Tennessee, retail sales reached $20.5 billion, a 4.6% increase on a year-to-year basis. Sales volume was 1.2% above 2005 levels, marking the fourteenth consecutive quarter of real growth.

ANALYSIS

The positive long term trends that have dominated the economic scene since 2003 continued into the summer quarter of 2006. In both dollar terms and real terms, sales were higher in both the United States and Tennessee again. However, there has been a slowdown in retail growth in recent quarters, and this can be good news or bad news.

Many analysts have become concerned that the rate of economic growth in the United States over the past two years is not sustainable in the long run, and any slowdown is welcome news to them. They are calling this a “soft landing”. Other observers are more pessimistic, and look at the slowdown as the opening phase of the next recession. Overall, the consensus remains that the economy is not in any trouble and periods of faster or slower growth are part of the normal expansion phase of the business cycle.

Retail activity in the Tri-Cities area improved over the summer months. Compared to the spring quarter, real growth was 0.6% compared to 0.3%. All three cities saw higher retail sales with Bristol enjoying a significant improvement. The downside is that only the cities and urbanized counties (plus Unicoi) have enjoyed better retailing performance. Adjusted for inflation, retail activity was down in four of the seven metro counties.

Looking ahead, what can we expect from the critical fourth quarter holiday selling season? At the national level, the retail outlook is affected by two main factors. The national labor market is very strong and people are working and making money. However, consumer confidence is shaky and there are concerns about inflation. As a result, there is hesitancy about excessive holiday spending. It will not be a “great” selling season but should be strong enough to sustain the business expansion.

The same comments can be applied to the local retail picture. The Tri-Cities labor market is very strong overall and created a record number of jobs in the third quarter. But manufacturing employment continues to decline, and local consumers share the same concerns as consumers in the nation at large. The outlook is for continued modest growth in retail sales during the fourth quarter holiday period.

Technical Note. This report was prepared in December 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.