Spokane retail sales predicted to slow in 2019
~December 20th, 2018
Although retail sales growth here has been stronger than expected in recent years due to low interest rates and increased job growth, some observers of the retail industry are predicting a slowdown in the coming year.
“Both retail and total taxable sales have been outpacing income growth in the region for a while, mainly due to continued low interest rates,” says Grant Forsyth, chief economist for Spokane-based Avista Corp. “Now that that’s ending, I’d expect it to affect retail sales, bringing them more closely into alignment with income growth.”
Forsyth says he anticipates taxable sales growth for the county next year will be closer to a 5 percent or 6 percent increase, rather than the 9 percent to 10 percent seen this year.
Data for the first half of 2018 show Spokane County saw a 9 percent increase in total taxable sales compared with sales during the year-earlier period.
“We’ll finish 2018 with strong total taxable sales, probably at around a 10 percent increase over last year,” he says. “But next year, I expect increases in interest rates will dampen retail activity and employment growth will slow as well, which will dampen growth in taxable sales.”
In terms of total contribution to taxable sales this year, Forsyth says vehicle sales have been the largest contributor, making up 27 percent of retail sales, and 13 percent of total taxable sales in Spokane County.
Although vehicle sales are still a significant contributor to total taxable sales, he says vehicle sales growth already shows signs of slowing.
“We’re seeing a shift away from auto sales, toward more construction-related sales,” he says. “Both categories are strong for now. The danger is they’re both cyclical industries and any slowdown in activity could cause sales to contract quickly.”
Patrick Jones, executive director of Eastern Washington University’s Institute for Public Policy and Economic Analysis, agrees that recent retail sales for Spokane County have been “considerably above long-term growth since the Great Recession.”
Looking ahead to 2019, however, Jones says the Washington state Economic and Revenue Forecast Council is predicting the growth rate of total personal income to drop to 4.7 percent from 6.9, which is expected to lead to a slowdown in retail sales growth for the state.
“For retail sales, total personal income growth is likely the best predictor,” he says. “To the degree that Spokane County follows the state pattern, we should then experience a slowdown in the growth of retail sales here.”
Jones adds that it’s difficult to project 2019 sales growth, due to the unpredictable outcomes of international trade disputes and the impact of rising interest rates on home and automobile purchases.
“If the Fed continues to raise short-term rates, a slowdown seems highly likely,” he says.
For 2018, Spokane County adopted a budget that factored in $28.2 million in local retail sales tax revenue, which is now projected to reach $30 million by the end of the year.
The county estimates local retail sales tax revenue will increase by just over 6 percent to about $32 million in 2019.