Posts tagged with Consumer Spending

Retail spending falls for month but still up for year; study suggests Kansas a cheap place to live; more Mizzou sports coming to local cable

Maybe we were all too dazed by the invasion of orange construction cones that began showing up in Lawrence in late May or early June. Or perhaps there is some other explanation that doesn’t involve a “road closed” barrier stuck in my radiator. But whatever the reason, new numbers show local shoppers took a bit of a break as summer began.

According to the latest sales tax numbers from Lawrence City Hall, retail spending for the period of mid-May to mid-June was down about 3.3 percent, compared to the same period a year ago. That decline ends a streak of seven consecutive months where consumer spending had increased compared to the same period a year earlier.

But this one-month setback is no reason to do something crazy, like try to drive the through intersection of 23rd and Iowa. The city’s sales tax collections are still in good shape for the year. The city has received seven of the 12 monthly sales tax payments from the state, and thus far, collections are up 3.4 percent for the year. So shoppers have been reasonably busy in Lawrence.

That year-to-date total is an important one, and the city’s recent discussions about building a new police headquarters building have reminded us why. The city is betting heavily on consumer spending in Lawrence to grow by at least 2 percent per year. If it doesn't, then the sales tax plan the city is proposing to pay for the police headquarters won’t work. It will come up short of dollars.

If a single year comes in with less than 2 percent growth, that probably isn’t going to cause too big a problem. What’s important is that the long-term average is 2 percent. So, is that a good bet for the city to make? The short answer is probably, but there is certainly no guarantee.

If you look at the last five years worth of sales tax growth — 2009 through 2013 — the average rate of growth is below the 2 percent threshold. It checks in at 1.5 percent. But it is worth remembering that we experienced the greatest economic downturn since the Great Depression during that five-year period. The city saw an actual decline in consumer spending in both 2009 and 2010, the first time in recent memory that the city has suffered a decline in two straight years.

If you look at the last 10 years, the average growth rate has been 2.4 percent per year. So, 2 percent doesn’t seem unreasonable, but it is important to monitor because it is not just the police headquarters project that would require that type of growth. The city’s funding plan for the Rock Chalk Park sports complex also depends on 2 percent annual growth.

But there is one other factor to keep in mind that is tougher to calculate: The city no longer gets to keep all of the sales taxes it collects. It has offered financial incentives — tax increment financing, to be specific — to several projects around town. That sort of incentive involves the city essentially providing the project a partial rebate on sales tax, for which the developer then uses the money to pay infrastructure, private parking and such. The amounts are becoming significant.

For example, the city is on pace to collect about $34 million in sales taxes in 2014. That is a little more than $400,000 more than what the city had budgeted for. But according to the city’s finance director, about $300,000 of that money will be turned over to the developers of The Oread hotel, which currently is the largest TIF district in the city.

None of that is to say the Oread TIF is a bad deal. The hotel certainly produces a lot of sales tax revenue for the city. But the point is, as the city adds more TIF districts, it does complicate the calculations for how much sales tax growth is needed to fund general city projects.

As for how Lawrence’s consumer spending is stacking up with other cities, here’s a look:

• Dodge City: down 0.5 percent

• Emporia: up 5.1 percent

• Garden City: up 5.3 percent

• Hays: down 17.5 percent

• Hutchinson: 2.6 percent

• Junction City: no change

• Kansas City: up 3.7 percent

• Leawood: up 0.1 percent

• Lenexa: up 3.5 percent

• Manhattan: up 0.9 percent

• Ottawa: 2.3 percent

• Overland Park: 3.6 percent

• City of Shawnee: up 4.2 percent

• Topeka: up 1.2 percent

• Sedgwick County: up 3 percent

Lawrence’s numbers stack up pretty well, especially compared to places like Manhattan and Topeka. But it will be interesting to watch how we finish out the year to ensure that this one-month decline isn’t the beginning of a trend.

In other news and notes from around town:

• I knew my fellow Kansans were just like me: We spend our wad on the all you can-eat-buffets, but scrimp on everything else.

At least that is one way to interpret a set of new federal numbers about spending patterns in Kansas and the other states.

The Bureau of Economic Analysis for the first time has released data showing per capita spending rates for a variety of goods and services, such as gasoline, utilities, health care and dining out.

The numbers show that Kansans spend $3,075 per person on food and beverages, including restaurants. That is more than $300 more than both the national average or the average for the seven states that make up the Plains region. But on every other category measured, Kansas comes in with below average spending levels.

The conclusion is unmistakable: Pasta bars that charge by the pound are expensive, but that doesn’t mean they’re not still a good value.

Actually, there may be other conclusions to draw as well. The numbers show that Kansas actually has the lowest per capita consumer spending average of any of the states in the Plains region. Kansans spend $32,523 per person on “personal consumption expenditures.” (Where is that aisle at in Dillons?) The national average and the average for the Plains states are both around $35,000. The biggest spenders in the Plains region are folks who live in North Dakota at $44,029. (They like their pasta in North Dakota.)

Here’s a look at our spending broken down by other categories:

— Gasoline and other energy goods: Kansas: $1,294. National Average: $1,328. Highest in the region: North Dakota, $3,916. Lowest in the region: Kansas

— Housing and utilities: Kansas: $5,180. National Average: $6,415. Highest in region: Minnesota, $6,101. Lowest in the region: South Dakota, $5,030.

— Health Care: Kansas: $5,809. National average: $5,886. Highest in the region: North Dakota, $7,785. Lowest in the region: Kansas.

— All other personal consumption expenditures: Kansas: $17,165. National average: $19,118. Highest in region: North Dakota, $23,735. Lowest in the region: Kansas.

I’m not sure exactly what we should make of these numbers. If you are business that makes your living selling consumer goods, these numbers probably aren’t that pleasing. If you are trying to live from paycheck to paycheck, maybe they are pleasing or maybe they aren’t. How much you spend generally is tied to how much you make. What does seem clear is that if you have ample income, Kansas is a pretty cheap place to live. But it would be interesting to see how Kansas does when you look at what our consumer spending is related to our average income.

But I’ve dropped my calculator in the marinara sauce, so those calculations will have to wait for another day.

• If Lawrence construction zone traffic hasn’t been enough fun for you, Lawrence customers of WOW cable soon will be able to turn on their T.V. and watch some University of Missouri sports. WOW has announced it will be adding the SEC Network to its system on Aug. 14. The sports network for the conference that includes Missouri, Alabama, Florida and others will be on channel 157. Perhaps there were lots of Lawrence cable consumers clamoring for the SEC Network, but it looks like this is more of an example of how the major networks have cable companies over a barrel. The SEC Network is owned by the same folks who own ESPN and Disney. WOW said carriage of the SEC Network was part of the cable’s system’s renewal of its contract with ESPN and Disney.

Reply 2 comments from Richard Heckler Brad Hightower

Retail spending totals in the city fall during October, but still up slightly for 2013

The up and down trend of retail spending in Lawrence is continuing.

The latest sales tax report out of Lawrence City Hall shows retail spending for the period of mid-August to mid-September, about the time students returned to campus, was down about 1.6 percent compared to the same period a year ago.

The decline comes after a whopping 17 percent increase in the previous month's reporting period. The city has received 10 of its 12 sales tax checks from the state this year, and thus far retail sales have been up in five of those months and they have been down in five.

The forward steps, however, have been just a little bit bigger than the backwards steps. Through the first 10 reporting periods, retail spending is up about 2.5 percent compared to the same period a year ago.

The bottom-line is that retail sales in the city are still growing but not nearly at the rate they were in 2012. At this time in 2012, sales tax collections were up 6.1 percent compared to 2011 totals.

Looking at a little bit broader picture, the large increase in 2012 came after Lawrence consumer spending hit some pretty pitiful levels in 2009 and 2010. Consumers started to ramp up in 2011, but it appears that 2012 is when consumers unleashed their pent up demand. That period of pent-up demand, it appears, is now over. Once you adjust for inflation, consumer spending in Lawrence is up only about 0.6 percent for the year. This year's sales tax collections are on track to meet the city's budget estimates, but if this moderation continues, it will make 2014 an interesting year to watch.

It also is interesting to watch what is going on in other major retail markets in the state. Lawrence is faring slightly poorer than many of the major retail areas in the state, with a few notable exceptions. Lawrence's 2.5 percent growth rate thus far in 2013 is better than Topeka at 1.6 percent; Manhattan at 1.1 percent; and far better than Hays, where something is either amiss with the reports or else a significant spending slow down has occurred. Sales tax numbers in Hays are down 9.9 percent for the year.

Here's a look at other major retail areas in the state:

• Emporia: up 3.6 percent

• Johnson County: up 4.3 percent

• Kansas City: up 5.7 percent

• Lenexa: up 6 percent

• Olathe: up 4.7 percent

• Ottawa: up 6.7 percent

• Overland Park: up 3.1 percent

• Salina: up 2.5 percent

• City of Shawnee: up 4.9 percent

• Sedgwick County: up 3.6 percent

Here's one other piece of data for you. The state periodically provides statistics on the type of consumer spending taking place in the state. The latest report shows spending by industry through the first six months of 2013. I don't have access to numbers specifically or Lawrence, but these statewide numbers may give glimpse at what sectors of the market are rising of falling locally.

Sales tax collections for sporting goods, hobby, book and music stores were the largest gainer in the retail sector, by percentage increase. Sales in that sector were up 5.2 percent during the first six months of the year. Other retail categories included:

• Vehicle and parts sales: up 4.3 percent

• Furniture and home furnishing: up 1.8 percent

• Electronics and appliance stores: down 2.8 percent

• Building material and garden supply stores: down 2.7 percent

• Grocery and food and beverage stores: up 2.8 percent

• Drug stores and personal care stores: up 3.0 percent

• Gasoline stations: down 1.9 percent

• Clothing and clothing accessories: up 3.6 percent

• General merchandise stores: up 0.8 percent

• Miscellaneous retailers: down 6.4 percent

• Restaurant and drinking establishments: up 1.7 percent

• Hotels and accommodations: up 2.1 percent