ETSU Bureau of Business and Economic Research

Tri-Cities Retail Sales Report

East Tennessee State University + Second Quarter 2011 + College of Business and Technology

THE TRI-CITIES

Retail activity improved in the Tri-Cities during the second quarter. On a year-to-year basis, dollar sales were up 8.6% in Bristol, 6.6% in Kingsport, and 5.5% in Johnson City. Much of this increase was due to higher prices. Still, adjusted for inflation, sales volume was up strongly in all three cities – rising 4.9% in Bristol, 3.1% in Kingsport, and 2.0% in Johnson City. In comparison, real sales increased 1.6% in the metro area, 1.9% in Tennessee, and 4.5% in the nation as a whole.

 BRISTOL TN-VA JOHNSON CITY KINGSPORT 
 Period   Sales  Y-Y%Ch  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 2002 891.0 0.0 1458.0 3.2 1138.9 0.7
 2003 890.5 -0.1 1458.3 0.0 1213.5 6.6
 2004 922.5 3.6 1545.3 6.0 1260.8 3.9
 2005 954.2 3.4 1676.6 8.5 1322.8 4.9
 2006 1018.9 6.8 1747.2 4.2 1398.7 5.7
 2007 1119.0 9.8 1855.4 6.2 1407.7 0.7
 2008 1070.8 -4.3 1848.1 -0.4 1445.0 2.7
 2009 982.8 -8.2 1760.2 -4.8 1349.6 -6.6
 2010 972.8 -1.0 1791.8 1.8 1379.9 2.2
 08:1 263.4 -3.5 432.2 1.9 327.2 -4.2
  08:2 245.6 -4.3 458.1 3.7 373.5 9.1
 08:3 271.8 -3.7 453.7 -2.9 360.3 9.1
 08:4 290.0 -5.6 504.1 -3.5 384.0 -2.5
 09:1 231.2 -12.2 409.6  -5.2 318.2 -2.8
 09:2 236.2 -3.8 432.5 -5.6 336.4 -10.0
 09:3 258.5 -4.9 431.6 -4.9 330.4 -8.3
 09:4 256.8 -11.5 486.5 -3.5 364.7 -5.0
 10:1  232.1 0.4 414.7 1.3 317.9 -0.1
 10:2 228.6 -3.3 433.7 0.3 342.0 1.7
 10:3 248.7 -3.8 437.9 1.5 331.0 0.2
 10:4 263.5 2.6 505.5 3.9 388.9 6.7
 11:1 228.4 -1.6 426.8 2.9 326.5 2.7
 11:2 248.1 8.6 457.5 5.5 364.6 6.6

THE METROPOLITAN AREAS

Over the April to June period, retail sales performance in the Tri-Cities Combined Statistical Area (CSA) increased for the fifth quarter in a row, with dollar sales rising 5.0% to $1,686 million. Adjusted for inflation, retail volume in the metro area was 1.6% above the same period in 2010. Dollar sales were higher in all CSA counties except Hawkins. Inflation adjusted sales activity was higher in Sullivan, Washington (VA), Scott, and Washington (TN). Sales volume was lower in Carter, Unicoi, and Hawkins Counties.

 TRI-CITIES CSA KNOXVILLE MSA CHATTANOOGA MSA
 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 2002 5293.0 2.2 9369.7 1.7 5699.3 -0.7
 2003 5354.2 1.2 9682.2 3.3 5769.2 1.2
 2004 5646.5 5.5 10235.7 5.7 6179.5 7.1
 2005 5975.4 5.8 10914.8 6.6 6579.9 6.5
 2006 6379.4 6.3 11817.0 8.3 7025.5 6.8
 2007 6643.2 4.6 12265.8 3.8  7293.2 3.8
 2008 6567.9 -1.1 11528.9 -6.0 7078.6 -2.9
 2009 6166.5 -6.1 10543.6 -8.6 6566.6 -7.2
 2010 6346.7 2.9 10875.7 3.2 6947.7 5.8
 08:1 1561.0  0.9 2769.2 -4.7 1687.9 -1.2
 08:2 1671.8 2.0 2980.8 -3.1 1827.7 -0.3
 08:3 1663.0 1.1 2885.0 -4.8 1744.1 -3.2
 08:4 1672.0 -7.7 2893.8 -11.0 1818.9 -6.7
 09:1 1444.9 -7.4 2455.2 -11.3 1539.1 -8.8
 09:2 1544.1 -7.6 2688.3 -9.8 1652.7 -9.6
 09:3 1566.4 -5.8 2610.1 -9.5 1597.7 -8.4
 09:4 1611.1 -3.6 2790.0 -3.6 1777.0 -2.3
 10:1 1439.3 -0.4 2464.4 0.4 1625.7 5.6
 10:2 1604.9 3.9 2741.7 2.0 1756.2 6.3
 10:3 1599.7 2.1 2740.1 5.0 1718.9 7.6
 10:4 1702.8 5.7 2929.4 5.0 1846.9 3.9
 11:1 1507.8 4.8 2587.1 5.0 1670.3 2.7
 11:2 1685.9 5.0 2941.7 7.3 1842.3 4.9

The retail picture continued to improve across East Tennessee during the spring months. Dollar sales in the Knoxville MSA increased 7.3% to $2,942 million, while the Chattanooga MSA reported retail revenues higher by 4.9% to $1,842 million. Adjusted for inflation, sales volume increased 3.7% in Knoxville, 1.6% in the Tri-Cities, and 1.4% in Chattanooga

UNITED STATES AND TENNESSEE

 UNITED STATES TENNESSEE 
 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 2002 3,466,007 2.4 66,387  1.8
 2003 3,619,031 4.4 69,191 4.2
 2004 3,855,039 6.5 73,059 5.6
 2005 4,094,052 6.2 78,479 7.4
 2006 4,304,173 5.1 82,925 5.7
 2007 4,451,679 3.4 85,997 3.7
 2008 4,409,501 -1.0 83,612 -2.8
 2009 4,091,723 -7.2 77,155 -7.7
 2010 4,355,442 6.5 79,284 2.8
  08:1 1,062,953 3.3 20,038 -0.9
 08:2 1,149,585 1.8 21,703 0.1
 08:3 1,121,736 0.4 20,929 -2.5
 08:4 1,075,227 -8.5 20,942 -7.5
 09:1  943,695 -11.2 18,241 -9.0
 09:2 1,027,972 -10.6 19,439 -10.4
 09:3 1,032,877 -7.9 19,155 -8.5
 09:4 1,087,179 1.1 20,320 -3.0
 10:1 999,184 5.9 18,168 -0.4
 10:2 1,098,330 6.8 20,115 3.5
 10:3 1,089,357 5.5 19,907 3.9
 10:4 1,168,571 7.5 21,093 3.8
 11:1 1,080,898  8.2 19,141 5.4
 11:2 1,186,800 8.0 21,210 5.4

Retail performance continued to improve in the nation and the state during the second quarter. Dollar sales in the United States increased for the seventh quarter in a row – growing 8.0% to $1,187 billion. Adjusted for inflation, real sales were higher by 4.5% - marking the seventh consecutive quarter of real growth. (U.S. retail activity declined for seven quarters during the 2008 to 2009 business recession, after twenty consecutive quarters of real growth during the 2002 to 2007 business expansion.) In Tennessee, dollar sales increased 5.4% to $21.2 billion. Sales volume was 1.9% above 2010 levels, marking the fifth quarter of real growth in retail activity (following ten consecutive quarters of declining sales volume during the recession).

ANALYSIS

The momentum of the retail recovery continued into the spring months. Whether measured in dollar sales or inflation adjusted real volume, retail activity was up in all of the markets covered in this report. The second quarter performance continued the trends established over the past year.

Dollar sales were a bit higher during the second quarter, as prices were inflated by higher energy costs. Nevertheless, the underlying improvement in real sales continued at the national, regional, and local retail markets.

As we discussed in the last retail report, retail performance continues to be one of the bright spots in the economic picture – especially at the national level. Production and job creation continue to be weak areas in the U.S. economy.

High levels of retail sales usually mean increased factory output and increased employment. The expected positive impact on the national economy has not occurred. Indeed, recent data show that production growth has dropped below the one percent level and job creation has stalled.

The local and regional economic picture could not be more different. In the second quarter, a large number of new jobs were created, pushing employment levels close to pre-recession levels. And if people are working, then they have money to spend, and that is being reflected in the local and regional retail sales data.

Turning to the business outlook, the diverging trends between the regional and the national economies cannot continue. Ultimately the sluggish national economy will affect local business conditions. What is the consensus for the national economy? Let us use gambler’s odds – and these odds are unchanged from the August labor market report.

The probability of strong production growth (falling unemployment) is zero. The odds of continuing weak growth (stable unemployment) are 40%. The probability of low or no production growth (rising unemployment) is 50%. The odds of falling output and a second recession (significantly higher unemployment) are small at 10%, but these odds were previously zero.

Technical Note. This report was prepared in September 2011. The “Retail Sales” figures used in this report are “Retail and Food Service Sales” which is the total 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 2007 U.S. Census of Retail Trade and 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. The 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.