Spokane Community Indicators e-Newsletter

ANNUAL TAXABLE RETAIL SALES STILL GROWING -

The national economy has received quite a bit of media attention over the past year. Defying a few expectations, it has continued to do well. Now the question has become what about the second half of the year? While there are a few different measurements providing insight into the strength of an economy, the Gross Domestic Product (GDP) is perhaps the best known. The U.S. Department of Commerce Bureau of Economic Analysis defines the GDP as the total "market value of goods and services produced by labor and property".

Unfortunately, the GDP is not available for individual U.S. counties, although it is for metro areas. But the metro area of Spokane includes two other counties (Pend Oreille and Stevens), so it is not a "clean" measure of economic activity. Total annual taxable retail sales, in contrast, is and serves as a reasonable proxy since consumer spending forms the largest part of any economy. Similar to the GDP measurement, annual taxable retail sales offers insight into the size, strength, and changes within a local economy.

The major difference between the GDP and taxable retail sales is the GDP considers the total market value of goods produced in an area while annual taxable retail sales only considers retail sales on goods deemed taxable by the state. Since Washington State sales tax is not owed on certain consumer goods such as food, pharmaceuticals, and some services, this measure is a little incomplete compared to the GDP.

Generally speaking, taxable retail sales include, but are not limited to: retail trade (furniture, home and garden centers, vehicles, department stores, restaurants, etc.); agriculture, forestry and fishing; mining; manufacturing; finance and insurance; arts and entertainment; and real estate.

Tonya Wallace, Chief Budget Officer for Spokane County, says Spokane County's "economy is a significant part of the State's overall economy - it is the fourth largest county in the state [by population] and the most economically active Metropolitan Statistical Area in

eastern Washington."

Looking at the Total Annual Taxable Retail Sales & Annual Growth Rate indicator on the Trends website, we see two positive signs. The first: $9.81 billion in taxable retail sales during 2017 are the highest on record. The second: 2017 is the seventh consecutive year with an increase from the previous year.

What might be driving these increases? It's not real estate, as taxes paid on these transactions are not included in the taxable retail sales figures. However, taxable retail sales of home improvement products and big ticket items purchased at furniture stores, for example, are significant.

Robin Toth, who heads up business development at Greater Spokane Incorporated, believes the driving forces have been e-commerce, new car purchases, and larger vehicles like RVs.

Wallace said "The sectors with the strongest growth are related to building/construction activity, which would include increases in equipment and furniture sales."

Toth says people have a little more money in their pockets and are feeling more comfortable making larger purchases than in recent years. Additionally, Toth states that people are feeling less apprehension to taking out loans to complete these larger purchases.

Passing the pre-Great Recession high mark of $7.68 billion in 2007 for the first time in 2014, this indicator has been moving in a positive trajectory. Taxable retail sales in Spokane County increased to $9.81 billion in 2017 from $9.11 billion in 2016, an annual growth rate of 7.7%, higher than the Washington average. This bodes well for 2018, as the early evidence shows: the increase in the first quarter over first quarter of 2017 was 10%, as the Total Annual Taxable Retail Sales indicator depicts. But before we bring out the champagne, we will let the trend line speak for itself a year from now, so stay tuned.

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