ETSU Bureau of Business and Economic Research

Tri-Cities Retail Sales Report

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

THE TRI-CITIES

The broad retail momentum of the summer months did not continue into the fourth quarter, with only Bristol merchants reporting strong sales performance during the critical holiday selling season. The dollar value of retail sales increased 7.8% to $314 million in Bristol and 1.5% to $362 million in Kingsport. In Johnson City, long the area’s retail growth leader, dollar sales actually declined 0.3% to $460 million. Adjusted for inflation, sales volume during the October to December period increased 5.7% in Bristol, but fell 0.5% in Kingsport and 2.3% in Johnson City. For 2006 as a whole, Bristol reported a 3.8% gain in retail volume, while real sales were flat in both Kingsport and Johnson City.

 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
 2006 1078.0 7.1 1681.9 3.1 1287.9 3.4
 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
  06:4 314.0 7.8 459.5 -0.3 362.1 1.5

THE METROPOLITAN AREAS

In contrast to the retail slump in Johnson City and Kingsport, the Tri-Cities Combined Statistical Area (CSA) enjoyed the best fourth quarter retail performance in three years. Over the fall months, dollar sales grew 5.3% on a year-to-year basis to reach $1,623 million. Adjusted for inflation, retail activity in the Tri-Cities CSA was 3.3% above same period in 2005. On an annual basis, retail sales in the metro area exceeded six billion dollars for the first time, increasing 4.7% in dollar terms and 1.4% in real terms.

The fourth quarter growth in retailing was concentrated outside the urbanized counties, a reversal of the pattern seen over the summer months. All seven counties reported higher dollar sales and sales volume, led by Unicoi, Scott, Washington (VA), Hawkins, Washington (TN), Carter, and Sullivan.

 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
 2006 6009.3 4.7 11307.7 7.0 6579.4 4.9
 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
 06:4 1623.1 5.3 3061.7 5.0 1757.1 5.5

The other two metro areas of East Tennessee also had a good holiday selling season. During the fourth quarter, Chattanooga MSA retail sales increased 5.5% to $1,757 million, while Knoxville MSA retail sales grew 5.0% to $3,062 million. Adjusted for inflation, sales volume increased 3.4% in Chattanooga and 3.0% in Knoxville (compared to 3.3% in the Tri-Cities). For the year 2006 as a whole, Knoxville sales increased 7.0% to $11,308 million (up 3.6% in real terms) while Chattanooga sales grew 4.9% to $6,579 million (up 1.6% in real terms).

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
 2006 4,364,996  6.1 81,560 5.2
 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 1,103,897 5.1 20,527 4.6
 06:4 1,143,006 4.3 21,747 3.8

During the fourth quarter, retail activity remained strong in the United States and Tennessee. Nationally, dollar sales increased 4.3% to $1,143 billion, while sales volume increased by 2.3%. Adjusted for inflation, U.S. retail sales have now increased for sixteen quarters in a row. In Tennessee, retail sales reached $21.7 billion, a 3.8% increase on a year-to-year basis. Sales volume was 1.7% above 2005 levels, marking the fifteenth consecutive quarter of real growth.

Looking at the annual data for 2006, national retail sales again exceeded the four trillion dollar level, marking a 6.1% growth in dollar terms and a 2.8% increase in real terms. Retail sales in Tennessee increased 5.2% to over eighty billion dollars. Adjusted for inflation, sales volume in the state rose 1.9% during the year.

ANALYSIS

The most interesting aspect of the retail activity covered in this report is the retail slump in Johnson City and Kingsport, the two major retailing centers, contrasted with the strong performance in Bristol and real growth in every metro area county. As a region, the fourth quarter holiday sales performance was very satisfactory, and in line with the sales growth in Knoxville and Chattanooga.

The positive long term trends that have dominated the economic scene over the past few years continued into the fourth quarter at the national, state, and regional levels. From that perspective, the continued retail growth in the fall months is not remarkable, and is good news. Many lines of retail business will do about forty percent of their annual sales in the holiday selling season, and these sales will be the profit or loss for the entire year. The tables show that the 2006 holiday season was very satisfactory for most retail operations.

Then there is Johnson City and Kingsport. Johnson City has been the retail growth leader of the region for years, and suddenly sales are down in both dollar and real terms – and during the critical holiday selling season. Kingsport saw some growth in the dollar value of retailing, but not enough to offset the effects of inflation, so real sales in the Model City were also lower.

Why would retail sales decline in the two major retail centers when Bristol and every county in the region are reporting good sales performance? From the perspective of economics, retail activity in the area has continued to grow but there have been significant shifts in the location of retail activity. New retail stores outside of the city boundaries of Johnson City and Kingsport are the reason. For example, the new Walmart Supercenter in Unicoi County has directly taken retail sales from Johnson City, and boosted retail sales in the county by over forty percent. Similar changes in retail patterns are occurring in Hawkins, Sullivan, and Washington (TN) Counties. This relocation of retail activity will have an impact on the distribution of sales tax collections between city and county governments.

What can we expect in the new year? At the national level, most analysts expect another “normal” year for the business expansion phase of the business cycle. Real growth in the nation will remain around three percent, the unemployment rate will vary between 4.5 and 5.0 percent, and inflation will remain under control. The Federal Reserve System will continue to monitor the economy and be ready to change interest rates to keep the business expansion on track. Their main concern is still focused on inflation issues, so interest rates are more likely to go up rather than down.

A strong national economy provides the basis for a favorable regional and local business outlook. The region should continue to enjoy modest but stable growth over the immediate future.

Technical Note. This report was prepared in March 2007. 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.