ETSU Bureau of Business and Economic Research

Tri-Cities Retail Sales Report

East Tennessee State University + Third Quarter 2013 + College of Business and Technology

THE TRI-CITIES

Retail performance continued to be mixed in the three cities during the third quarter. Kingsport reported a large increase in retail activity - dollar sales jumped 7.1% to $387 million, while inflation adjusted sales were up 5.5% in the Model City. In contrast, retail sales were down 1.1% in Johnson City to $459 million and 5.6% in Bristol to $251 million. In volume terms, retail activity was lower by 2.6% in Johnson City and 7.1% in Bristol compared to the same period in 2012. In comparison, inflation adjusted sales volume was down 1.8% in the metro area, but higher by 1.8% in Tennessee and 3.5% in the United States.

 
 BRISTOL TN-VA JOHNSON CITY KINGSPORT 
 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 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
 2012 1088.0 7.3 1910.3 1.2 1491.2 2.4
 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
 12:1 259.9 13.8 453.6 6.3 354.3 8.5
 12:2 264.3 6.5 463.5 1.3 368.4 1.0
 12:3 265.7 1.9 464.1 -1.5 361.0 -2.2
 12:4 298.2 7.6 529.1 -0.7 407.5 3.0
 13:1 243.0 -6.5 452.7 -0.2  352.7 -0.5
 13:2 248.9 -5.8 472.8 2.0 375.0 1.8
 13:3 250.8 -5.6 459.1 -1.1 386.6 7.1
 

THE METROPOLITAN AREAS

In the third quarter, retail activity declined again in Tri-Cities Combined Statistical Area (CSA). Dollar sales fell slightly by 0.3% $1,666 million, while retail sales volume decreased 1.8% below the third quarter of 2012. Inflation adjusted retail sales have now decreased in the metro area during five of the last six quarters. Among the seven metro counties, dollar sales and inflation adjusted sales were higher in Scott and Washington (TN) Counties. Carter saw higher sales but retail volume was down slightly. Dollar sales and real volume were lower in Sullivan, Hawkins, Washington (VA), and Unicoi Counties.

TRI-CITIES CSA KNOXVILLE MSA CHATTANOOGA MSA

 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 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
 2012 6762.3 1.9 12105.0 2.4 7629.1 3.9
 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
 12:1 1641.7 8.9 2883.7 11.5 1818.6 8.9
 12:2 1692.0 0.4 3043.0 3.4 1939.6 5.3
 12:3 1670.4 -0.8 2992.7 -2.1 1883.7 0.3
 12:4 1758.1 0.1 3185.7 -1.7 1987.2 1.9
 13:1 1589.2 -3.2 2843.1 -1.4 1790.7 -1.5
  13:2 1716.6 1.5 3072.8 1.0 1945.4 0.3
 13:3 1666.3 -0.3 3019.5 0.9 1880.3 -0.2
 

Retail performance declined in all the East Tennessee metro areas during the third quarter. Dollar sales rose 0.9% in Knoxville, but fell 0.2% in Chattanooga and 0.3% in the Tri-Cities. Adjusted for inflation, sales volume was down across the board – falling 0.7% in Knoxville, 1.7% in Chattanooga, and 1.8% in the Tri-Cities. Retail volume has been falling in East Tennessee since the summer of 2012.

UNITED STATES AND TENNESSEE

 
 UNITED STATES TENNESSEE 
 Period  Sales  Y-Y%Ch  Sales  Y-Y%Ch 
 2007 4,443,807 3.4 85,997 3.7
  2008 4,402,508 -0.9 83,612 -2.8
 2009 4,082,092 -7.3 77,155 -7.7
 2010 4,307,947 5.5 79,284 2.8
 2011 4,631,122 7.5 84,030 6.0
 2012 4,881,385 5.4 87,711 4.4
 10:1 991,137 5.3 18,168 -0.4
 10:2 1,086,431 5.9 20,115 3.5
 10:3 1,076,186 4.4 19,907 3.9
 10:4  1,154,193 6.5 21,093 3.8
 11:1 1,066,683 7.6 19,141 5.4
 11:2 1,169,633 7.7 21,210 5.4
 11:3 1,162,358 8.0 21,202 6.5
 11:4 1,232,448 6.8 22,477 6.6
 12:1 1,152,703 8.1 20,829 8.8
 12:2 1,226,070 4.8 22,189 4.6
 12:3 1,213,092 4.4 21,628 2.0
 12:4 1,289,520  4.6 23,065 2.6
 13:1 1,188,117 3.1 21,014 0.9
 13:2 1,280,607 4.5 22,907 3.2
 13:3 1,274,572 5.1 22,360 3.4
 

The national recovery in retail activity gained strength during the summer quarter. Dollar sales in the United States increased for the sixteenth quarter in a row – rising 5.1% to $1,275 billion. Inflation adjusted sales were higher by 3.5%, marking the fifteenth consecutive quarter of real growth. (U.S. retail activity declined for seven quarters during the 2008 to 2009 recession, after increasing twenty consecutive quarters during the 2002 to 2007 business expansion.)

In Tennessee, dollar sales increased 3.4% to $22.4 billion. Adjusted for inflation, sales activity in the state was 1.8% above 2012 levels. With the exception of the first quarter of 2013, the state has enjoyed higher levels of retail activity in thirteen of the last fourteen quarters. (During the Great Recession period, state sales volume declined for ten consecutive quarters.)

ANALYSIS

The sales patterns of the second quarter continued into the summer months. The retail recovery in the United States has returned to the comfortable growth rates of 2012 (after a modest slowdown in the first quarter). In Tennessee, retail sales posted the best quarter in over a year. And sales performance declined again in the Tri-Cities and the other metro areas of East Tennessee.

Retail sales in the United States have been expanding for four years, and have been a bright spot in the otherwise weak business recovery from the Great Recession of 2008-09. The recent growth in national employment levels and the continued strength in consumer demand are now the main engines of overall economic growth.

Tennessee has enjoyed its own retailing recovery – based on the strength of sales growth in Middle and West Tennessee which has more than offset declining retail performance in East Tennessee. The state government lives off of retail sales tax collections, so the state-level retail growth has provided welcome financial relief to the state budget.

The Tri-Cities area economy has been in a slump since early 2012. Employment levels and retail purchases have been declining together. With falling job levels, families now have less money to spend at retail stores.

These factors make for a mixed outlook for the critical holiday selling season in the fourth quarter. The conventional wisdom is that forty percent of retail stores will make their annual profit or loss during November and December. To complicate matters, this holiday selling season is very short and has already been impacted by bad weather.

Nevertheless, the main factors driving holiday sales are employment levels and consumer confidence. From the employment perspective, the retail outlook is better for the nation than for the Tri-Cities region. The confidence perspective was mixed until mid-December, but two events should provide a late but welcome boost to consumer confidence and holiday spending.

First, the new budget legislation passed by Congress and moving to the President’s desk has eliminated all risk of another government shut-down until 2015. So there will be no “budget cliff” or “debt ceiling cliff” until after the 2014 election cycle. Second, the recent growth in employment and production has led the Federal Reserve to announce that it is able to reduce its level of financial stimulation.

Technical Note. This report was prepared in December 2013. The “Retail Sales” figures used in this report are “Retail and Food Service Sales” which are 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.