ECONOMIC PULSE
An update on the local and national economy
Posted October 2005
Fourth quarter retail looks strongest at the high end
Nationally, expectations are for a good fourth quarter, especially for luxury goods. Workers' earnings are increasing, and employers seem to be switching from temporary to permanent hiring. Based on those factors, it appears that consumer spending will increase in the coming months. Upmarket people (incomes over $75,000) account for 40 percent of retail sales. Upmarket shoppers say they are more confident about their financial positions, while middle market households ($22,500 to $75,000 income) are "less optimistic about job security and growth in take-home pay" and down market households (less than $22,500) reported "heightened pessimism about job prospects and incomes," according to Retail Forward, Inc.
Comparing 2004 to 2000, upscale department stores are thriving, while mid-tier stores struggle. Department stores' share of total retail sales shrunk from 6 percent in 1992 to just over 3 percent in 2004, according to the U.S. Census Bureau.
Leading the retail categories is home-focused durable goods, especially at major home improvement stores. Other growing categories are home electronics and health spending. And Internet sales of retail goods are booming. In the future, keep an eye on who is buying vehicles - people 50 and older account now for half of U.S. auto sales, and as baby boomers age, they will account for an even greater share of spending, and not just on cars. One reason is that, with the children grown, boomers have more income to spend on themselves.
Locally, retail sales in the Puget Sound are rising, because consumers here spend as much as their earnings increase. For 2005, retail sales are predicted to be 6.6 percent above 2004.
Where can Puget Sound retailers expect to see higher sales, year over year? Conway Pedersen Economics, Inc. predicts increases of:
- 8.9 percent in furniture and electronics,
- 7.6 percent in vehicles. Vehicle sales may have topped out for this year due to the exceptionally strong discounts by manufacturers this summer,
- 6.7 percent in building materials,
- 5.4 percent in restaurants and drinking establishments,
- 5 percent in clothing and accessories and
- 3.7 percent in food and beverages for consumption at home.
All of those predictions may be revised if oil prices continue to rise, causing higher costs at the gas pump and, this winter, higher expenses for home heating.
Economic Indicators 2005 uses the new NAICS codes used to report retail sales. 2004 data used SIC. Trending is imprecise.
Sources: economy.com "A Look Back, A Look Ahead" by Dr. Scott Hoyt Aug. 8, 2005; Customer Growth Partners, LLC March 2005; Retail Forward, Inc. report Aug. 24, 2005; Conway Pedersen Economics, Inc. "The Puget Sound Economic Forecaster" June, 2005. *Puget Sound refers to King, Snohomish, Pierce and Kitsap counties.
Puget Sound Economic Trends
| June 2005 (P) | May 2005 | June 2004 | |
| Rates | |||
| Purchasing Power U.S. Consumer Dollar | 51.4 | 51.4 | 52.7 |
| Inflation U.S. | 194.5 | 194.4 | 189.6 |
| Inflation (Seattle-Tacoma-Bremerton)^ | 199.8 | N/A | 195.2 |
| Unemployment % (Seattle-Bellevue-Everett MD) | 4.8% | 4.9% | 5.3% |
| 30-Year Mortgage Rate (NOTE: Aug. rate topped 6%) | 5.77% | 5.87% | 6.42% |
| Economic Indicators | |||
| Employment (Seattle-Bellevue-Everett MD) | 1,390,800 | 1,376,500 | 1,345,300 |
| - Professional &ęBusiness Services | 192,100 | 190,000 | 182,000 |
| - Retail Trade | 144,500 | 143,100 | 140,800 |
| - Government | 202,900 | 202,100 | 201,500 |
| - Aerospace | 63,400 | 62,700 | 58,500 |
| - High Tech (hardware & software) | 54,600 | 53,300 | 52,400 |
| Airport Passengers (Sea-Tac) | 2,772,850 | 2,467,273 | 2,762,441 |
| Home & Condo Resale (King, Kitsap, Pierce, Snohomish counties) | 7,938 | 7,437 | 8,004 |
| Median Home Price | $298,100 | $292,900 | $262,400 |
| Residential Permits (King, Pierce,Snohomish counties) Ź | 1,876 | 1,672 | 1,965 |
| New Car Sales** (King, Snohomish, Pierce counties) | May 2005: 11,204 | April 2005: 9,864 | May 2004: 11,920 |
| Taxable Retail Sales (King, Snohomish, Kitsap and Pierce counties) | |||
| Quarterly | Q1, 2005 | Q1, 2004 | % Change |
| Retail Trade | $6,172,341,891 | $5,850,196,788 | 5.5% |
| - Building Materials/Hardware | $572,359,377 | $572,662,755 | -0.1% |
| - General Merchandise | $1,068,354,378 | $954,936,265 | 11.9% |
| - Food & Beverage Stores | $377,870,132 | $496,371,965 | -23.9% |
| - Motor Vehicles & Parts | $1,690,853,878 | $1,665,887,644 | 1.5% |
| - Apparel/Accessories | $458,824,322 | $378,799,394 | 21.1% |
| - Furniture/Appliances/ Electronics | $734,504,196 | $758,094,554 | -3.1% |
| - Ecommerce & Mail Order | $59,432,524 | N/A | |
| - Other/Misc. | $1,210,143,084 | $1,023,444,211 | 18.2% |
| Note: Eating & Drinking Places were moved from Retail Trade (above) to Services (below) |
|||
| Services & Non-Retail Activities | $2,296,400,733 | $2,841,717,417 | -19.2% |
| - Eating & Drinking Places | $1,141,422,408 | $1,052,236,858 | 8.5% |
| - Accommodations | $203,389,574 | $212,079,267 | -4.1% |
| - Personal | $134,038,427 | $96,354,863 | 39.1% |
| - Business | $515,432,305 | $520,245,573 | -0.9% |
| - Repair/Maintenance (this category's components have changed) | $302,118,019 | $416,518,826 | -27.5% |
^ Seattle inflation is reported only in even-numbered months.
** New Car Sales and Home & Condo Resale data are for King, Snohomish and Pierce counties.
Ź Building permits are for residential, privately owned units in the Seattle-Bellevue-Everett PMSA.
Bases: Most references are to the three-county area of King, Snohomish and Island counties. Exceptions noted.
Sources: Conway-Pedersen Economics, Inc.; Auto-R.L. Polk Co.; Housing sales & home prices-Northwest Multiple Listing Service; Inflation/CPI-U.S. Department of Labor Bureau of Labor Statistics; Employment-Washington Labor Market & Economic Analysis Regional Labor Economist; Mortage rate-HSH Associates; Airport-Sea-Tac Operations; Building Permits-U.S. Census Bureau; Retail Sales-Washington Department of Revenue