Iowa State University
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News Service

News Service:

Annette Hacker, director,
(515) 294-3720

Office: (515) 294-4777

03-04-09

Contacts:

Meghan O'Brien, Regional Capacity Analysis Program, (515) 294-4095, (515) 991-1947 (c), mcobrien@iastate.edu

Mike Ferlazzo, News Service, (515) 294-8986, ferlazzo@iastate.edu

ReCAP report finds state per capita retail sales are down 4.0 percent since 2000

AMES, Iowa -- Iowa's retail per capita sales (taxable sales and not total retail sales) have gone down 4 percent between 2000-08, according to the new Retail Sales Analysis & Report for Fiscal Year 2008 by Iowa State University's Regional Capacity Analysis Program (ReCAP).

Authored by ISU economist Meghan O'Brien, the report also shows that despite record setting consumer spending expansion nationally since 2000, Iowa's retail sales showed no growth when adjusted for inflation.

But that's not all bad news.

"If anything surprised me, it's that maybe our numbers weren't down more and we didn't have a larger decline," said O'Brien, who is also an ISU Extension program specialist. "The fact that our sales have not changed when adjusted for inflation for eight years was surprising. Also, I think I went into this year thinking 2007-08 would have seen a larger decline in the aggregate."

O'Brien's report also found that 16 of Iowa's 99 counties had per capita retail sales higher than the state average. Those same 16 counties also had sales higher than the state average in 2007.

"That indicates that the consolidation of trade and retail that the state was experiencing continues in the same manner -- meaning Iowa's not undergoing a complete structural shift," she said.

She documents in the report that Iowa has seen a decline in the retail health of small towns and rural communities, and more recently a trend towards consolidation of retail trade in suburbs and ancillary cities at the expense of metro areas and rural areas. O'Brien says that trend will force some communities to view retail health differently and look for innovative approaches for growth.

One of those approaches may be tourism. A recent report on Iowa hotel/motel tax revenue found a roughly 10 percent gain in last fiscal year, even though nationally most large cities saw declines. That may indicate that in the country's current economic climate, Iowans chose to save money by traveling closer to home in 2008.

In fact, O'Brien's report found that Clay County in the state's Lakes' corridor overtook traditional leader Polk County for the state's highest per capita retail sales in 2008.

"What that may indicate is in the fiscal year that ended on March 31, the tourism draw was strong to the state," O'Brien said "In terms of per capita sales, number one is now Clay County, number two is Polk County and number three is Dickinson County. The Lakes' corridor is in Clay and Dickinson counties.

"One of the things to consider is how high energy prices are affecting travel," she said. "And if people aren't leaving Iowa to take cruises and vacations elsewhere, perhaps they're using our lakes more. Those could be economic shifts that have a positive impact within the state."

But overall, the economic retail news is not good in the report, which analyzes data from the Iowa Retail Sales and Use Tax Report, generated by the Iowa Department of Revenue. O'Brien concludes that the retail sector finds itself in a bubble that requires strong correction -- meaning some businesses won't survive.

"I hate to put it this way, but not everybody should survive," O'Brien said. "This is a bubble as much as it was for the housing sector. There was a speculation, development and growth done for short-term gains that are not sustainable for long term growth. Some businesses have to go for us to find any sense of equilibrium, and that makes people understandably nervous since they don't want that to be their business.

"But in the retail economy right now, there are very few people making profits," she said. "All the profits are centralized to a small percentage of firms, with everybody else just trying to break even. When you weed out some of that excess, the remaining firms will be in a better position to be more profitable and tailor themselves more to consumer demands. That's something that, frankly, we need."

The complete Iowa Community Reports, which includes the retail sales reports, can be found at http://www.recap.iastate.edu/retail/. They also include reports on population trends, child well-being and school district profiles.

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Click on picture for print quality version.

Obrien2

Meghan O'Brien

Quick look

Iowa's retail per capita sales (taxable sales and not total retail sales) have gone down 4 percent between 2000-08, according to the new Retail Sales Analysis & Report for Fiscal Year 2008 by Iowa State University's Regional Capacity Analysis Program (ReCAP), authored by ISU economist Meghan O'Brien.

Quote

"I hate to put it this way, but not everybody should survive. This is a bubble as much as it was for the housing sector. There was a speculation, development and growth done for short-term gains that are not sustainable for long term growth. Some businesses have to go for us to find any sense of equilibrium, and that makes people understandably nervous since they don't want that to be their business."

Meghan O'Brien