Consumer spending in a statewide slump
The fallout from Florida's troubled housing market is taking its toll on virtually every area of consumer spending from electronics to office supplies to cars, sending a bad omen for this year's holiday retail season.
Stores are already running scared, offering deals this weekend normally reserved for after Thanksgiving. As talk of a possible recession grows, retailers can't afford to take chances on the holiday season, which can represent 25 to 40 percent of their annual sales.
Fueling those fears is hard data: State sales tax collections have been declining every month since last November. This is the first time since January 1992 that there has been a 12-month period in which overall sales tax collections were down. Even after 9/11, things weren't this bad.
Retail sales tax collections for August were down 4.6 percent statewide, compared to August 2006. The picture was even bleaker in the Fort Lauderdale area, where sales declined 5.9 percent, but slightly better in Miami-Dade County, which posted a 2.6 percent decline.
''I've never seen numbers like this,'' said Tony Villamil, chief executive of The Washington Economics Group in Coral Gables. ``This is a pretty severe downturn all across the board. What this is telling us is that Florida is leading the nation into a severe slowdown. It definitely feels like the R word.''
Economists also caution that retail sales tax collections, which last year totaled $21.9 billion and were levied on such things as autos, appliances, hotel stays, clothes and toys, represent about half of all retail spending. No taxes are levied on food or services.
Unfortunately, the higher you fly, the lower you can fall. Florida sales tax collections were increasing in double digits in 2004 and 2005 due to factors including hurricane rebuilding, mortgage refinancing and a condo building boom.
''Much of the spending . . . was a temporary surge and none of that was sustainable,'' said Frank Williams, economist with the Florida Office of Economic and Demographic Research.
``We expected the slowdown, but it's been more dramatic than we anticipated.''
Gone are the boom days when Florida consumers, buoyed by soaring home values, used those gains as a bank to fund everything from home improvements to extravagant vacations.
Instead, the combination of a declining housing market, rising fuel prices and an increasing cost of living has many consumers putting the brakes on unneeded spending and big-ticket purchases. Add to that skyrocketing insurance rates and a credit crisis.
''Floridians are being hurt by everything that's going wrong in the economy,'' said Mark Vitner, senior economist with Wachovia.
``That's leaving folks with less money to spend on everything else. These are tough times in Florida.''
Double-digit declines have shown up for months in categories such as business investment, building and autos. But August was the first month in which sales tax collections fell for consumer nondurables -- the most commonly purchased categories like clothes, shoes and general merchandise.
The only category to remain insulated from the declines has been tourism and recreation, which also includes restaurant sales.
While the declines have occurred in all areas of the state, Miami has stood up better than most.
Sales tax collections in Miami-Dade did not start declining until April, and have remained smaller than elsewhere in the state, even Fort Lauderdale.
That's because Miami continues to benefit from an influx of investment from Latin Americans and Europeans, as well as growth in local exporting businesses.
Don't look for the Florida economy to turn around anytime soon.
''This is going to last through the fall and early next year,'' Villamil said.
None of this bodes well for merchants during the upcoming holiday shopping season.
The National Retail Federation has predicted that holiday retail sales will grow by only 4 percent this year to $474.5 billion. That would be the lowest increase since 2002, when sales rose 1.3 percent. The International Council of Shopping Centers is predicting same-store sales at U.S. retail chains for the November/December season will rise by 2.5 percent and overall sales by 4.3 percent.
Retailers are already trying to drum up sales with earlier-than-ever price cuts. Wal-Mart and Toys R Us on Friday are kicking off doorbuster sales like those normally found the day after Thanksgiving. Wal-Mart is offering a $348 laptop computer, while Toys R Us will have 50 percent discounts on games, scooters and more.
Values may be the key way to motivate shoppers this season. It's already working at Dolphin Mall, where sales are up 14 percent for the year and traffic is up 8.9 percent. Some of that boost has come from increased tourism and the opening of new stores.
''We're not seeing any slowdown,'' said Pete Marrero, general manager of Dolphin Mall. ``People are looking to get a bigger bang for their buck, and outlet stores can offer that opportunity.''
Despite the performance at Dolphin Mall, most experts say that won't be indicative of the holiday season in Florida. For the first time in years, Florida holiday retail sales are expected to come in below the national average. Vitner predicts growth will be in the neighborhood of 3 percent and others agree.
''It's not going to be high-flying times in Florida the way it used to be,'' said Cynthia Cohen, president of Strategic Mindshare, a Miami retail consulting firm. ``Florida is going to have a very difficult holiday season. It's going to be a ho, ho, hum year.''
BY ELAINE WALKER - Miami Herald - Posted on Fri, Nov. 02, 2007
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