Florida Economic Update:
Outlook for Retail Sales for 2008-2009
By:
Tony Villamil, CEO
The Washington Economics Group, Inc.
Retail Days at the Capitol & Board Meeting
Doubletree Hotel
Tallahassee, Florida
March 4-7, 2008
Agenda
1. Status of Economic Modeling Project to
Forecast Retail Sales by Product Category
2. Outlook for Macro Drivers of Florida’s
Economy
3. Outlook for Drivers of Retail Sales Based on
Forecast Model
4. Trends in Taxable Retail Sales
5. Conclusion
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Macro Drivers of Florida’s Economy
Drivers of Retail Sales
Retail Sales Activity
Outlook 2008-2009
Macro Drivers of Florida
Tendency
U.S. Economy

Global Economy

Florida Business Climate

3
Status of Model to Forecast Retail Sales
in Florida
•
•
•
•
Preliminary Findings
Population growth and per capita income change
account for a statistically significant 87 percent of the
change in total retail sales in Florida
Consumer expectations on the economy, together
with month of the year, account for 12 percent of the
expected changes in retail sales
A 1 percent change in population changes retail sales by
4/10th of 1 percent in the short run, and 9/10th of 1
percent in the long run
A 1 percent change in real per capita income changes
retail sales by 1/2 a percent in the short run and by
slightly above 1 percent in the long run
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Drivers of Retail Sales
• Drivers suggest a moderate recovery in retail sales,
starting in 2009
• A return to strong expansion is unlikely until 2010
5
Florida Population Growth
2001-2007
Thousands
Florida Total Population
18,500
18,000
17,500
17,000
16,500
16,000
15,500
15,000
17,736
18,058
18,251
17,343
16,349
2001
16,668
2002
16,959
2003
2004
2005
2006
2007
Source: U.S. Bureau of Census.
• Population growth is a key driver of retail sales
• Growth has slowed from 2 to 2½% in the “boom” years of
2003-2006 to an estimated 1% in 2007 and 2008
• Fundamentals suggest a 1½% growth in population through
2010
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Florida Per Capita Personal Income Trend
Florida Per Capita Personal Income
$37,000
$35,798
$35,000
$36,500
$34,001
$33,000
$32,534
$31,000
$29,000
$29,266
$29,702
$30,290
$27,000
2001
2002
2003
2004
2005
2006
2007
Source: Florida Research and Economic Database.
• Per Capital Personal Income grew strongly, in the 6 to 7%
annual rate from 2003-2006, stimulating the expansion of
retail sales in most product and services categories
• This key driver is forecast to expand at a slower 4 to 5%
annual rate in 2008-2010 – back to trend growth
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Recent Florida Taxable Sales Performance
Reflects Much Slower Expansion of
Economic Activity in 2007-2008
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Florida Taxable Sales
(December 2007/December 2006)
Florida Taxable Sales
$34.0
$33.6
$ Billion
$32.0
$32.9
$31.4
$30.7
$30.0
$28.0
$27.4
$26.0
$24.0
$23.9
$24.9
$22.0
2001
2002
2003
2004
2005
2006
2007
Source: Florida Economic and Demographic Research.
• At end 2007 (December) taxable sales were below the level achieved in
December 2004 as population growth, per capita personal income and
consumer expectations impact retail purchases
• Taxable sales were down a significant 6.9% between December
2007/December 2006 – trend is continuing in first half of 2008
• Most of the declines occur in consumer durables, autos and accessories
and construction-related sales
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Regional Performance of Taxable Sales in Florida
(Dec 2007/Dec 2006)
A. Selected Regions: Declines in Taxable Sales Greater than State Average
Region
Decline
Key Categories in Downturn
• Punta Gorda
Minus 21.5%
Construction and durable sales
• Ft. Myers
Minus 16.4%
Autos and accessories, construction
and business sales
• Ocala
Minus 13.3%
Durables, autos and business sales
• Ft. Pierce
Minus 11.6 %
Construction, business and durables
sales
• Naples
Minus 11.1%
Construction and business sales
Indicative of smaller regional economies
with large dependence on real estate
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[continued]
B. Selected Regions: Declines in Taxable Sales Below State Average
Region
Decline
Key Categories
• Miami
Minus 3.1%
Autos, durables and business sales
• Orlando
Minus 5.0%
Durables, autos and construction
sales
• Palm Beach
Minus 5.0%
Autos, construction and business
sales
• Ft. Lauderdale
Minus 5.5 %
Autos, construction and business
sales
Tourism and Recreation Taxable Retail Sales
ARE UP In:
• Daytona Beach
+ 7.8%
• Miami
+3.1%
• Orlando
+10.7
• Naples
+2.1%
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Bottom Line: Outlook for 2008-2009
• Florida macro drivers suggest a moderate upturn
starting in 2009
– U.S. economic activity likely to pick up
– Global economic growth expected to remain moderate
– Florida business climate: property insurance and tax issues
• Improvement in Florida macro drivers leads to:
– Slight increase in population growth to 1½%
– Moderate increase in personal income per capita
– Improvement in consumer expectations, especially “big
ticket” purchases
• Retail sales forecast growth
– 2½% -- 2008
– 5% to 6% -- 2009
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The Washington Economics Group, Inc.
2655 LeJeune Road, Suite 608
Coral Gables, Florida 33134
Phone: 305-461-3811
www.weg.com
[email protected]
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