New
Spending Increases for
Summary
Unusual
growth in local retail sales in the fourth quarter of 2003 was observed by the
Center for Business and Economic Research (CBER) at
- Were the increases restricted to the fourth quarter 2003 or were they part of a trend?
- To what extent were the increases just inflation, and to what extent were these increases still evident in “inflation adjusted” spending?
- To what extent were the increases in inflation adjusted spending part of sales growth predictable on the basis of local economic recovery from the recession?
- What role was played
by the major new
Key
findings include:
- Total inflation
adjusted Peoria MSA non-automotive retail sales during the fourth quarter of 2003 were running at an annual
sales rate that was $220 million greater than they were prior to the
second quarter Grand Prairie retail developments in the City of Peoria.
- A 9.9% increased
annual spending rate for the City of
- By the first
quarter of 2004, City of Peoria sales tax revenues from
non-automotive retail sales in the City were running at a rate that was
over $4 million a year greater than the rate experienced in the first
quarter of 2003, prior
to the second quarter Grand Prairie retail developments in the City of Peoria.
Preliminary
results for first quarter 2004 City of
Background
As part of the CBER’s ongoing
studies of local business and economic conditions, the Center for Business and
Economic Research (CBER) reviewed the fourth quarter 2003 retail sales data for
counties and cities in
Fourth quarter 2003 Peoria MSA
non-automotive retail sales were up 10.1% from the fourth quarter of the year
before. Within the MSA, the data showed a 6.2% increase in combined fourth
quarter non-automotive retail sales for the suburban counties of the MSA, a
12.6% increase for the City of
These increases raised numerous questions:
- Were the increases restricted to the fourth quarter 2003 or were they part of a trend?
- To what extent were the increases just inflation, and to what extent were these increases still evident in “inflation adjusted” spending?
- To what extent were the increases in inflation adjusted spending part of sales growth predictable on the basis of local economic recovery from the recession?
- What role was played
by the major new
The present
study is intended to address these questions.
Method
Due to the volatile nature of automotive sales, analyses were restricted to non-automotive retail sales.
All sales data were adjusted for inflation unless otherwise indicated. The U.S. Dept of Commerce Midwest States Consumer Price Index (CPI) inflation measure was used for these adjustments rather than the national CPI.
Unless otherwise indicated, the quarterly non-automotive retail sales data were “seasonally adjusted” to facilitate identification of quarterly changes that occur above and beyond normal seasonal changes in sales (e.g., the normal increase in sales during holiday shopping of the fourth quarter).
Analyses focused on the
non-automotive retail sales of the five
Local employment growth was used as a surrogate measure for local economic growth. The CBER relied on the well-established historic correlation between area employment and retail sales in the period prior to the 2003 to predict the impact of 2003 economic growth on 2003 non-automotive retail sales. We computed a regression based formula that specifies the historic impact of the seasonally adjusted number of employed area residents in a given quarter on the seasonally and inflation adjusted non-automotive retail sales in that quarter. That formula was used to predict seasonally and inflation adjusted non-automotive retail sales for each quarter of 2003 that would have occurred based on economic growth in that quarter.
Findings
Annual Data: The changes in annual inflation adjusted sales in the
Peoria MSA during 2001-2003 are shown in Figure 1. Such economic growth as occurred in 2001 and
2002 allowed non-automotive retail sales in the suburban counties of the Peoria
MSA to increase $11.0 million in 2001 and $21.9 million in 2002.
The
2003 results for
Quarterly Data:
The non-automotive
retail sales of the Peoria MSA and its component areas for each quarter of the
2001-2003 period appear in Figure 2 (below). Quarterly non-automotive retail sales
(inflation adjusted and seasonally adjusted) for the Peoria MSA fell throughout
2002, so that by the fourth quarter, non-automotive retail sales of $769.2
million were down to their lowest level since the second quarter of 2001. Quarterly non-automotive retail sales grew
during 2003, and reached $833.1 million by the fourth quarter of 2003, the
highest level in three years.
The
10.9% growth of the City of
The
role of employment growth in quarterly
The growth of non-automotive retail
sales in the second quarter of 2003 was over four times the first quarter’s
$3.3 million increase. A similar
increase in City of
An alternative explanation to
employment growth for the unusual non-automotive retail sales growth in City of
Figure 4 (below) displays the
quarter-to-quarter growth of non-automotive retail sales in the City of
Further increases in non-automotive retail sales for the City of
Based on the fourth quarter
figures, City of Peoria non-automotive retail sales were running at an annual rate $146 million greater than they had
in the first quarter (just before the second quarter Grand Prairie retail
developments), while combined Peoria MSA non-automotive retail sales were running at an annual rate that was
over $220 million more than in the first quarter.
The only significant expansion
(i.e., over 100,000 square feet of retail space) of retail development in the
city of Peoria in 2003 other than that at Grand Prairie was the new Peoria
Wal-Mart, which opened about midway
through the third quarter, in August 2003.
The sales at the new Wal-Mart would be expected to represent
sales shifts rather than sales growth in a metropolitan area like the Peoria
MSA, due to the range of comparable retail stores in the area that include
existing Peoria MSA Wal-Mart stores, all of which would compete against the new
Wal-Mart. Sales shifting within the
City of
Impacts on
Governmental bodies are typically more interested in actual sales tax revenues than in the inflation adjusted, seasonally adjusted figures used for the analyses above, so Figure 5 (below) displays actual (not inflation adjusted, not seasonally adjusted) sales tax revenues from the above sales taxes on non-automotive retail sales.
In the fourth quarter of 2003 we see growth since the fourth quarter of 2002 in the City’s total non-automotive retail sales tax revenues. The fourth quarter 2003 total non-automotive retail sales tax revenues of $10.4 million were up from $9.2 million the year before, for a $1.2 million (13.6%) increase in the fourth quarter’s non-automotive retail sales tax revenues, only a small portion of which would have occurred on the basis of economic growth over the period.
Conclusions
Total inflation adjusted Peoria MSA
non-automotive retail sales during the
fourth quarter of 2003 were running at an annual rate $220 million greater than
they were prior to the second quarter Grand Prairie retail developments (see
below). A 9.9% increased spending rate for the City of Peoria (location of the Grand
Prairie retail developments) was the source of $146
million of the $220 million increase in the annual non-automotive retail sales rate for the Peoria MSA during this period.
By the first quarter of 2004, City of Peoria sales tax revenues from non-automotive
retail sales in the City were running at a rate that was over $4 million a year
greater than the rate experienced in the first quarter of 2003, prior to the second quarter Grand Prairie
retail developments in the City of Peoria (see below). These new sales tax revenues for the
City will be useful to improving quality of life in
Preliminary analysis of data
released recently for retail sales and sales tax revenues for the City of