Ringing Off the Wall
The upward trend in retail sales that began in 2010 has continued in 2011, creating what will likely be the second-best year on record for Lafayette Parish.
By Leslie Turk
Lafayette Regional Airport is shattering monthly records, unemployment in Lafayette Parish is down to 5 percent, our middle class had the sixth fastest growth rate in the country between 2006 and 2010. And there is even good news on the horizon for natural gas prices. While the commodity remains cheap, the cooler weather, more switching from coal and efforts to export some of America’s over-abundant supply of natural gas have analysts predicting prices may go up significantly.
Lafayette Regional Airport is shattering monthly records, unemployment in Lafayette Parish is down to 5 percent, our middle class had the sixth fastest growth rate in the country between 2006 and 2010. And there is even good news on the horizon for natural gas prices. While the commodity remains cheap, the cooler weather, more switching from coal and efforts to export some of America’s over-abundant supply of natural gas have analysts predicting prices may go up significantly.
But there is one economic indicator telling us more about the condition of the local market than any of these: retail sales. That’s where Lafayette Parish’s economy is really shining.
More than $450 million of taxable retail sales in October — a 15.3 percent increase over the same month last year, which is the largest comparable month-over-month increase so far in 2011 — has bumped the 2011 year-to-date increase to 11.2 percent. The Lafayette Economic Development’s forecasting model indicates that 2011 total retail sales should reach nearly $5.34 billion — outpacing 2009 and 2010 totals and likely ranking as the second highest sales year on record — second to 2008, when $5.4 billion in goods and services were sold.
While final retail sales numbers for 2011 will not be reported by the Lafayette Parish School System until February, there are signals that 2012 looks to be even better. Early results of a survey of local businesses by the B.I. Moody College of Business at UL, in conjunction with ABiz and LEDA, show that 94 percent of respondents anticipate 2012 will bring equal or better sales, with 75 percent expecting stronger sales. The full results of that survey will be published in next month’s ABiz.
“Historically, retail sales are 40 percent of Personal Consumption Expenditures, which in turn make up two-thirds of the Gross Domestic Product,” says LEDA President and CEO Gregg Gothreaux. “That means retail sales account for just more than one quarter of the GDP, and the retail industry is a reflection of the current conditions of the overall economy.”
Gothreaux stresses that retail sales are an excellent gauge of consumer confidence and attitudes. “A rise in retail sales receipts is usually the result of an increase in effective buying income as people join or improve their position in the workplace,” he says. “A decrease in retail sales could mean a lack of confidence in the economic climate or a loss of disposable income. If consumers are worried about being laid off or a decrease in their income, they will cut back on spending. Conversely, if they get a raise or think they have more money coming their way, they will spend more.”
Overall, food and services are the best performing categories in 2011 with double digit increases over 2010 numbers, 10.3 percent and 10.4 percent, respectively. Food includes grocery stores, restaurants, bakeries and other similar establishments. Services is a broader category that includes hotels, leasing (office equipment, autos), dry cleaners, machine shops and warehouses. Only general merchandise is down, a slight 1.5 percent, from 2010.
LEDA’s analysis shows that Lafayette Parish experienced double digit gains in retail sales between 2005 and 2008; however, sales dropped by 11 percent in 2009 in response to the national recession. In 2010 sales rebounded to nearly $5 billion, thanks to strong sales in the second half of the year. That trend has obviously continued into 2011.
The most recent retail sales report shows that October hotel/motel receipts totaled $6.56 million, an increase of 2.5 percent over October 2010. Year-to-date hotel/motel receipts are outperforming 2010 by a healthy 11.6 percent.
When personal finances change, Gothreaux says, so do the types of goods and services individuals buy, not just the amount spent. “As consumers, we find places where we can cut back or increase our spending as needed.”
In a 2009 report by the International Council of Shopping Centers about how the recession was impacting consumer shopping habits, more than half of the respondents reported cutting back on fine dining, casual dining, movie theater attendance and salon/spa services. Between 40 and 50 percent reported cutting back in most retail categories. Not surprisingly, the categories least likely to be affected were visits to discount stores and grocery stores — in essence the purchases of necessities.
The distribution of total sales in Lafayette Parish shows the impact the 2008 recession began to have on the purchase of non-essential items such as apparel and automobiles, despite that 2008 was a record-breaking year for retail sales. Apparel sales dropped from 4.23 percent in 2005 (the last year before the extraordinary growth due to hurricanes Katrina and Rita) of overall sales to 3.98 percent in 2008. Similarly, auto sales dropped from 19.94 percent to 14.56 percent. While apparel sales have recovered and surpassed 2005 numbers, currently at 5.1 percent of total retail sales, automobile sales have decreased further to 10.93 percent. “This isn’t completely surprising,” Gothreaux says, “since automobiles are the most volatile retail category because it is a big ticket item.”
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