Better days inevitable for weak retail spending

ORLANDO - Look for weak retail sales in Florida to continue for the remainder of this year, driven by a deepening recession that has threatened the incomes of both working and retired residents alike, one of the state’s leading economists told Florida Real Estate Journal.

However, observers should not lose sight of the fact that every recession since World War II has ended in recovery - although recovery in Florida may lag that of the nation for several reasons, said Stan Geberer of Fishkind & Associates, an economic research firm.

Following is Geberer’s perspective on Florida retail spending and the factors driving it.

FREJ: What does your most recent research indicate about retail spending in Florida?

Geberer: “I think we’re down on average 5% year-over-year from 2008. Generally, overall retail sales have seen negative growth in the past year. This has contributed to a large budget deficit at the state level.”

What continues to drive the situation? Housing alone? Or is there something of a more fundamental nature developing?

“This is the effect of a deepening recession, which is deeper and longer than any recession in the post-World War II era. The housing market condition is a part of that overall economic downturn.

“The loss of wealth contributes to people generally spending less in retail sales, as does the lack of available credit, rising unemployment and uncertainty in the stock markets. There are a lot of factors that come into play that drive overall spending down.”

Where is unemployment heading?

“Unemployment is typically a lagging indicator. It’s likely to rise through the remainder of 2009 and, in Florida, perhaps into 2010.”

Are some Florida counties faring better/worse than others?

“In general, I would expect that counties with higher unemployment rates, greater overhang in excess real estate inventory and dramatic declines in population growth would show the greatest declines in retail sales.”

Is net in-migration holding up, or are we starting to see slippage there?

“Two years ago or so, Allied Van Lines reported that more people were leaving the state than moving into it. That was a time when we had near-record population growth in Florida. It was hard to reconcile what Allied Van Lines was saying compared to what the data was showing. So nobody believed them. But in looking at the data today, it appears there was an element of truth in what they said.

“With respect to net migration, 2006 to 2007 Census Bureau numbers show, in fact, more people left the state than moved into it from other states in the union. Florida’s population growth still went up. Growth still occurred, but all of that growth came from international migration and natural increase - more births than deaths. Looking back, what Allied Van Lines said was not inconsistent with the data.

“It suggests there is a real competitive concern with respect to Florida population growth - and that, in fact, in the year when more people left Florida than came from other states, Georgia and North Carolina had more net population growth than Florida did.”

What do you see for the near future regarding retail spending here?

“It’s likely we won’t see much improvement at all in 2009. At some point there will be the unfolding of pent-up consumer demand. While some people have pulled back in recent months for a wide variety of reasons, at some point in the future you’re just going to have to replace many of the things you use. You’ll have to buy a new car or a washer/dryer. You’ll have to replace your shoes.

“People are holding off, in part, because they think prices will go down - and because of the uncertainty regarding their employment and the unavailability of credit. Eventually, you’ll have to break down and say, ‘Okay, I gotta’ get this thing.’ That’s likely to occur sometime in 2010.”

Is deficit spending at the federal level giving pause to buyers?

“Retail buyers are, in fact, the same people as in the general public. The general public is very uncertain about not only deficit spending but about a lot of things - including the things I mentioned before. There are a lot of reasons people would be reluctant to spend a lot right now, and that’s reflected in the retail sales numbers. It’s expected.

“These are cyclical events. We’ve looked at every recession in the post-World War II era and, at the end, there is a recovery. In Florida, it may take a little longer because much of the Florida economy depends on growth. While the national economy may recover in 2010, it’s going to be a year after that until people have gotten back on their feet elsewhere up North and find they have the ability to move to Florida.

“Because this is a housing- and finance-related recession - and those are industries that are particularly strong in the Florida economy - we will tend to lag the national recovery.”

Are there any other reasons for the consumer pullback?

“Retirees and people near retirement age have lost considerable wealth. Some of them may be delaying retirement because of that - and some may not have the resources to do the things in retirement they expected. That may affect people retiring to Florida, as well as spending by retirees that are here today.

“We have always tended to view the retirement population as recession-proof because of their steady income, but to the degree that income is pension-driven or interest or dividends from stock investments, incomes can well go down for retirees.”