ETSU Bureau of Business and Economic Research

Tri-Cities Retail Sales Report

East Tennessee State University + Fourth Quarter 2008 + College of Business and Technology

THE TRI-CITIES

As expected, the deepening recession overwhelmed the urge to spend during the holiday selling season. During the fourth quarter, dollar sales fell 1.8% in Kingsport, 2.8% in Johnson City, and 7.1% in Bristol. Adjusted for inflation, holiday sales volume decreased 3.1% in Kingsport, 4.2% in Johnson City, and 7.1% in Bristol. In comparison, real sales were down 8.9% in Tennessee and 9.0% in the nation as a whole.

For the year 2008, Kingsport reported the smallest decline in retail activity with a loss of only 0.4% in inflation adjusted sales. Retail volume decreased 3.3% in Johnson City and 7.7% in Bristol. In comparison, real sales were down 6.3% in Tennessee and 3.8% in the United States

 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
 2007 1157.1 7.3 1778.0 5.7 1283.8 -0.3
 2008 1108.3 -4.2 1783.6 0.3 1327.2 3.4
 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
 07:1 280.7 12.2 406.3 4.8 311.4 5.8
 07:2 267.6 8.9 423.2 2.3 312.2 -1.8
 07:3 291.8 8.9 447.9 6.4 301.1 -4.0
 07:4 317.0 0.9 500.5 8.9 359.1 -0.8
 08:1 272.3 -3.0 417.1 2.6 300.5 -3.5
 08:2 255.9 -4.4 442.1 4.5 343.1 9.9
 08:3 280.9 -3.7 437.8 -2.2 330.9 9.9
 08:4 299.1 -5.6 486.5 -2.8 352.7 -1.8

THE METROPOLITAN AREAS

During the fourth quarter, dollar sales in the Combined Statistical Area (CSA) declined sharply, falling 7.8% to $1,573 million. Adjusted for inflation, retail volume in the Tri-Cities metro area was a 9.2% below the same period in 2007. Dollar sales and sales volume decreased in all seven metro counties. The smallest loss was reported by Hawkins County, followed by Unicoi, Carter, Washington (TN), Scott, and Washington (VA) counties.

 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 11307.5 7.0 6579.4 4.9
 2007 6252.0 4.0 11676.0 3.3 6776.8 3.0
 2008 6174.9 -1.2 10974.4 -6.0 6577.4 -2.9
 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
 07:1 1454.4 5.5 2766.9 8.3 1587.1 4.1
 07:2 1543.0 2.9 2927.6 2.1 1703.9 3.1
 07:3 1548.6 2.6 2886.0 2.2 1674.8 1.8
 07:4 1706.0 5.1 3095.4 1.1 1810.9 3.1
 08:1 1467.7 0.9 2636.0 -4.7 1568.4 -1.2
 08:2 1571.2 1.8 2837.4 -3.1 1698.3 -0.3
 08:3 1563.1 0.9 2746.3 -4.8 1620.6 -3.2
 08:4 1572.8 -7.8 2754.7 -11.0 1690.1 -6.7

Retail performance continued to deteriorate over the fall months in the other metro areas of East Tennessee. Chattanooga MSA sales revenues fell 6.7% to $1,690 million, while Knoxville MSA sales were down 11.0% to $2,755 million. Adjusted for inflation, sales volume dropped 8.0% in Chattanooga and 12.3% in Knoxville (compared to the 9.2% decline in the Tri-Cities).

During 2008 as a whole, the Tri-Cities area was less impacted by the recession than Knoxville or Chattanooga. Dollar sales in the Tri-Cities metro area fell 1.2% to $6,175 million (down 4.8% in real terms). Chattanooga sales declined 2.9% to $6,577 million (down 6.4% in real terms) and Knoxville sales decreased 6.0% to $10,974 million (down 9.4% 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 3,846,316 6.4 72,527 5.1
 2005  4,081,692 6.1 77,544 6.9
 2006 4,307,730 5.5 81,560 5.2
 2007 4,482,668 4.1 84,412 3.5
 2008 4,474,970 -0.2 82,071 -2.8
 06:1 995,416 7.4 18,745 6.2
 06:2 1,095,381 6.2 20,542 6.4
 06:3 1,088,359 4.7 20,527 4.6
 06:4 1,128,574 4.0 21,747 3.8
 07:1 1,034,828  4.0 19,851 5.9
 07:2 1,138,169 3.9 21,276 3.6
 07:3 1,125,879 3.4 21,059 2.6
 07:4 1,183,792 4.9 22,226 2.2
 08:1 1,074,582 3.8  19,669 -0.9
 08:2 1,166,513 2.5 21,303 0.1
 08:3 1,139,696 1.2 20,543 -2.4
 08:4 1,094,179 -7.6 20,556 -7.5

The recession also caused a miserable holiday shopping season in the nation and the state. In the United States, dollar sales decreased 7.6% to $1,094 billion. Adjusted for inflation, real sales were lower by a staggering 9.0%. This marks the fourth decline in a row, after twenty consecutive quarters of real growth during the 2002 to 2007 business expansion. Tennessee suffered a similar retail performance. Dollar sales fell 7.5% to $20.6 billion, and sales volume was 8.9% below 2007 levels. Retail activity has now declined for five consecutive quarters in Tennessee, creating the prospect of a one billion dollar deficit in the state budget.

Looking at the annual data for 2008, the dollar value of retail sales fell only 0.2% in the nation to $4,475 billion. But adjusted for inflation, real sales in the U.S. were down 3.8%, compared to a 1.1% increase in 2007. Retail sales in Tennessee decreased 2.8% to $82.1 billion. Sales volume in the state dropped 6.3%, compared to a 0.6% increase in 2007.

ANALYSIS

There are no surprises in this report. It is now well understood that the nation is in a major recession, and that business conditions will continue to get worse, before they get better. The last time we saw such bitter economic news was the severe recession of 1981 and 1982. It is worth recalling that the federal government under a Republican President and with a Democratic Congress undertook a massive stimulus package of tax cuts and increased spending. They were successful, but in retrospect, they probably should have done more.

The overriding danger in this recession is not its severity, but the meltdown and continuing dysfunction of the financial system. As Ben Bernanke, Chairman of the Federal Reserve, has stressed, there will be no recovery until the financial system is healed. And the last time the financial system collapsed was in the early 1930s, and we know what that led to.

The central bank has been pumping massive amounts of liquidity into the financial system, and the federal government is undertaking the largest fiscal stimulus since the Depression and World War II. But the financial system remains paralyzed and the credit flows necessary for our capitalist economy to function are not being provided.

The economic outlook for the nation and the region depends upon events in the financial system. If there is an early resumption of normal financial operations, business activity would quickly recover. If the financial system continues to malfunction, the recession will last longer, and the ultimate government intervention in the financial system will be more drastic.

With this in mind, if the financial system begins to function normally over the next several weeks, then an end to the recession by late spring or early summer is very probable. Then we can fret over when the recovery will begin and will it be strong or weak. And if we are very lucky, a year from now we will be concerned about tight labor markets and inflation dangers.

Technical Note. This report was prepared in March 2009. 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.

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 and Finance, 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.