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Spending plunge broadens statewide
Sales taxes head to first yearly drop since '92 recession.
By MARK ALBRIGHT, Times Staff Writer
Published October 20, 2007
Depressed sales of construction materials, home improvements and furnishings triggered by Florida's burst housing bubble have started spreading to a drop in other types of consumer spending.
In fact, unless the state's economy perks up in the next few months, Florida will report its first decrease in annual sales tax collections since the 1992 recession.
"We have not reported decreased sales tax collections since post-9/11, but that was not as deep or lasted as long as this time," said Frank Williams, an economist at the state Office of Economic and Demographic Research.
The freshest harbinger of the downturn: The retail sales tax collection fell 2.5 percent statewide and 4 percent in the four-county Tampa Bay area in July, compared with a year ago. The state's sales tax, which totaled $21.9-billion last year, reflects less than half of all retail spending. It's also levied on many things usually not considered retail spending, so economists caution that it's only one barometer of consumer spending.
However, a state government Retail Activity Index focused only on collections of taxable consumer retail goods has dropped for 13 consecutive months and plunged deeper into negative territory in May, June and July see chart. Adjusted for inflation, the index reflects taxable spending declines dating back to February.
Depressed sales tax collections are one reason the Legislature recently cut spending to cure a budget shortfall. Yet as some legislators push higher sales taxes as an answer to a property tax relief stalemate being debated in Tallahassee, the current tax collection slump shows a downside to that approach. Sales taxes suffer during economic downturns.
Indeed, double-digit decreases in housing-related spending, business capital investments and autos and accessories have been reported for months. Now it has crossed into other categories. Even tourism and consumer nondurable spending (such as clothing and shoes), which combined are about two-thirds the total, were down in June.
There are multiple causes. Some Floridians are spending more of their budget on higher energy and food prices, which aren't taxed. Some of the drop is due to a slower flow of new residents into Florida. But economists say much of the decline is because spending has settled down after being inflated by the condo construction binge and insurance cash that poured in after 2004 and 2005 hurricane damage. Now it's all part of the fallout of an overheated housing market that has yet to hit bottom.
Some ask whether the recession in the home building industry will spread to the rest of the state economy.
"This is the unwinding of the housing bubble and mortgage meltdown and job loss spread across the construction and financial services industries," said Stan Gerberer, an economist with Fishkind & Associates in Orlando. "With housing values deteriorating, people don't feel as well off to spend."
"How long it lasts depends on how much of a hangover Florida has to overcome (in overpriced real estate) from the housing market and subprime lending problems," said Sean Snaith, an economist with the University of Central Florida. "We've got the dry mouth and headache, but it's clear they will last well into 2008."
The figures also show how much Florida's economy relies on tourism and the growth and development industry that has stumbled in most of the densely populated parts of the state. State officials already say annual net population growth (births and new residents outnumbering deaths and residents leaving the state) has dropped by about 100,000 to less than 330,000 in 2007, a level forecast to last a couple more years until housing costs come down.
The effect on taxable retail sales is an eye-opener to many.
"After watching our retail sales just go up every year thanks just to population growth, it really jumps out when numbers go negative this sharply and spread to non-housing categories of consumer spending," said Larry Henson, business intelligence officer with Tampa Bay Partnership, who spotted the local trend while compiling a regional economic scorecard.
Declines steeper than in the rest of the state plague the west coast of Florida from Naples north to Tampa, but state officials expect the trend will eventually include the Orlando and South Florida markets.