ETSU Bureau of Business and Economic Research

Tri-Cities Retail Sales Report

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

THE TRI-CITIES

Retail performance became mixed in the Tri-Cities during the critical holiday selling season. On a year-to-year basis, dollar sales increased 5.4% in Johnson City, 5.2% in Bristol, and 1.8% in Kingsport. However, much of the higher dollar sales reflected rising prices. Adjusted for inflation, retail volume was up 2.1% in Johnson City and 1.9% in Bristol, while declining 1.4% in Kingsport. In comparison, real sales were down 0.1% in the metro area, but increased 3.2% in Tennessee and 3.2% in the United States.

The annual data show that 2011 was the best year for retail growth since 2007. In terms of dollar sales, retail activity in the three cities has generally recovered to pre-recession levels. However, adjusted for inflation, retail performance is still below the 2007 high point. Sales volume is lower by 4.7% in Kingsport, 6.2% in Johnson City, and 16.5% in Bristol.

 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
 2011 1014.5 4.3 1888.2 5.4 1456.0 5.5
 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
 11:3 260.8 4.9 471.3 7.6 369.1 11.5
 11:4 277.2 5.2 532.7 5.4 395.7 1.8

THE METROPOLITAN AREAS

Over the October to December period, dollar sales in the Tri-Cities Combined Statistical Area (CSA) increased for the seventh quarter in a row, rising 3.2% to $1,757 million. But this gain was due entirely to inflation. Adjusted for price changes, retail volume in the metro area fell 0.1%, essentially unchanged from the same period in 2010. County data reflect this regional performance. Dollar sales were higher in Hawkins, Washington (TN), Unicoi, Sullivan, and Carter Counties, while declining in Scott and Washington (VA) Counties. Inflation adjusted sales activity increased in only Hawkins and Washington (TN) while falling in the other five 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
 2011 6635.5 4.6 11827.7 8.8 7341.4  5.7
 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
 11:3 1684.6 5.3 3057.0 11.6 1878.7 9.3
 11:4 1757.2 3.2 3241.9 10.7 1950.1 5.6

Among the East Tennessee metro areas, Knoxville enjoyed the best retail performance. Dollar sales in the Knoxville MSA jumped 10.7% to $3,242 million, while the Chattanooga MSA reported an increase of 5.6% to $1,950 million. Adjusted for inflation, sales volume was up 7.2% in Knoxville, 2.2% in Chattanooga, but down 0.1% in the Tri-Cities. The annual retail sales for 2011 show that the Tri-Cities and Chattanooga are at the pre-recession 2007 level in dollar sales, while Knoxville has yet to fully recover. Adjusted for inflation, all three metro areas are below 2007 sales volume – Knoxville is down by 11.1%, the Tri-Cities by 7.9%, and Chattanooga by 7.2%.

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
 2011 4,698,694 7.9 84,030 6.0
 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 1,187,137 8.1 21,210 5.4
 11:3 1,185,089 8.8 21,202 6.5
 11:4 1,245,570 6.6 22,477 6.6

The recovery in retail activity continued in the nation and the state during the fall quarter. Dollar sales in the United States increased for the ninth quarter in a row – rising 6.6% to $1,245 billion. Adjusted for inflation, real sales were higher by 3.2% - marking the eighth 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 6.6% to $22.5 billion. Sales volume was 2.3% above 2010 levels, marking the seventh quarter of real growth in retail activity (following ten consecutive quarters of declining sales volume during the recession).

The annual data make 2011 the best year for retail performance since 2007. In terms of dollar sales, retail activity in the United States is well above the pre-recession high point, while Tennessee sales are still two billion dollars lower. However, when adjusted for inflation, retail volume in the nation and the state has yet to reach the pre-recession high point in 2007. Real sales are lower in the United States by 2.7% and in Tennessee by 9.9%.

ANALYSIS

This report covers the fourth quarter which includes the critical holiday selling season. As noted in the last report, sales in November and December can represent 40% of annual revenue for many types of retail stores. The strong retail performance of recent quarters continued into the fall months at the national and state level, but weakened in the region.

The annual data show that 2011 was the best year in retail sales in the past four years. Even in the metro area, the flat fourth quarter could not offset the strong growth in the first three quarters. At the national level, dollar sales are nearly $250 billion above the pre-recession high in 2007. The Tri-Cities and Chattanooga metro areas are back to 2007 levels. Retail sales remain below pre-recession levels in Tennessee and Knoxville.

But when adjusted for inflation, the 2011 data tell a different story. In all the markets covered by this report, real sales remain below the high point of 2007. Nationally, retail activity is still down 2.7%, while Tennessee sales volume is down 9.9%. Since the state government lives off of sales tax revenues, this means that the state has nearly ten percent less in real resources compared to four years ago.

The national economic picture has not fundamentally changed. Retail performance is the brightest and strongest area of the economic recovery. Output growth is anemic and the labor market is barely able to create enough new jobs to accommodate population growth. Recently there has been some optimism about employment and unemployment.

There are some twelve million workers who have dropped out of the labor force due to the four years of recession. There are eight million holding part-time jobs who want full time jobs. Among the thirteen million workers who are officially unemployed, some five million are jobless due to the weak economy. Added up, some twenty-five million workers have been affected by the Great Recession. If all these folks were put back to work, it would add nearly $2.3 trillion to GDP each year.

Most analysts are pessimistic about future growth in the national economy. The standard outlook is for continued slow growth and a return to full employment sometime after 2020. In the meantime, millions of Americans (primarily young people) will be jobless or significantly under employed. And we will be losing $2.3 trillion in production each year.

Business conditions in the Tri-Cities area are much better than the national situation. Job creation is high and has pushed employment levels are back to pre-recession numbers. (Unfortunately the unemployment numbers remain high, reflecting young people who have returned home to live with their parents after losing jobs in other places.) Behind the higher numbers for employment are increased production and larger payrolls. And despite the flat fourth quarter, consumers in the Tri-Cities were in a mood to spend during most of the year.

The cautionary note, as in previous reports, is the potential impact on regional business conditions by the continued weakness in the national economy. Recent local gains are at risk in the face of adverse national economic events.

Technical Note. This report was prepared in March 2012. 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.