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Business & Technology

Shoppers ‘bright spot’ for area economy

September 6th, 2011 10:01 pm by Kate Prahlad

Retail sales remain a “bright spot” in an otherwise bleak economic picture, according to a second quarter retail sales report authored by local economist Steb Hipple.
On a year-to-year basis, dollar sales rose 5.5 percent in Johnson City, 6.6 percent in Kingsport, and 8.6 percent in Bristol, showed the retail report from East Tennessee State University’s Bureau of Business and Economic Research. In 2011’s second quarter, dollar sales reached $248.1 million in Bristol, $457.5 million in Johnson City, and $364.6 million in Kingsport, totaling $1.686 billion for the Tri-Cities metro area, an increase of 5 percent over 2010’s second quarter.
Though much of that increase in dollar sales can be attributed to higher prices, adjusting for inflation showed sales volume was also up strongly in all three cities, Hipple said. The entire metro area saw sales volume increase 1.6 percent, and individually, sales volume rose 4.9 percent in Bristol, 3.1 percent in Kingsport, and 2 percent in Johnson City.
“The momentum of the retail recovery continued into the spring months,” Hipple said. “Whether measured in dollar sales or inflation adjusted real volume, retail activity was up in all of the markets covered in this report. The second quarter performance continued the trends established over the past year.”
In addition to the Tri-Cities sales growth, the state of Tennessee also had both dollar sales and sales volume rise above 2010’s levels, by 5.4 percent and 1.9 percent, respectively.
Even the national retail market performed well in the second quarter, recording its seventh consecutive quarter of real growth, Hipple said. Dollar sales increased 8 percent and real sales were higher by 4.5 percent in 2011’s second quarter over the same period last year, the report showed.
Still, the national economy is lagging in two of the most important recovery factors despite the continuing improvement in retail sales.
“High levels of retail sales usually mean increased factory output and increased employment. The expected positive impact on the national economy has not occurred. Indeed, recent data show that production growth has dropped below the 1 percent level and job creation has stalled,” Hipple said. “The local and regional economic picture could not be more different. In the second quarter, a large number of new jobs were created, pushing employment levels close to pre-recession levels. And if people are working, then they have money to spend, and that is being reflected in the local and regional retail sales data.”
But Hipple warned that the “diverging trends between the regional and the national economies cannot continue,” and ultimately the worst of the national economy trends will affect local business conditions.
His prediction on the direction of the national economy is that the probability of strong production growth, and therefore falling unemployment, is zero; the odds of continuting weak growth are 40 percent; low or no production growth (rising unemployment) is 50 percent’ and the odds of falling output and a second recession (significantly higher unemployment) are small at 10 percent, but these odds were previously zero.

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