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9/10/2013 4:04:00 PM
Arizona's July sales at pre-recession level

Howard Fischer
Capitol Media Services

PHOENIX -- Arizona's economy is showing SOME real signs of life, with retail sales reported to the state in July being the best in nearly a decade.

New figures from the state Department of Revenue put retail sales at $4.47 billion. The last time it was that high was in 2007, before the real estate bubble burst and the state and nation headed into recession.

The numbers, which reflect what people were buying in June, show a particular jump in sales of furniture and other home furnishings.

Economist Marshall Vest of the Eller College of Management at the University of Arizona said these retail sales figures are more than just good. He said the increase actually is running above what has been the improving trend since the end of the recession.

Vest said the 23.5 percent year-over-year increase in sales of furniture and furnishings may reflect some of monthly "volatility' of these kinds of numbers. But he pointed out that, even looking at the sector of the economy on a longer term, sales for the most recent 12 months are still up more than 6 percent over the prior 12 months.

Overall, the economy has not quite recovered to its pre-recession levels. Total retail spending reported in July is still slightly below what it was the same month in 2007.

But Dennis Hoffman of the W.P. Carey School of Business at Arizona State University said what makes the current spending so incredible, both in its increase and absolute numbers, is that there still are far fewer people working now than there were before the recession.

This new report also shows growth of just 1.6 percent in year-over-year sales at bars and restaurants. But Elaine Smith, an economist at the Department of Revenue, said the spending at those establishments -- nearly $854 million -- should not be seen as a disappointment.

She said July 2012 happened to be a particularly exceptional strong month. And the latest numbers are still 10 percent higher than 2011.

In fact, Hoffman pointed out that the latest bar and restaurant spending is the highest for this time of year since 2004.

Less clear is what's happening in the lodging industry.

On paper, revenues from hotels and motels took a 22 percent dive from the prior year.

Smith said, though, that reflects a one-time adjustment. Factoring out that change puts the year-over-year change back into positive territory by about 4 percent.

Smith Travel Research, which monitors the hospitality industry nationwide, also showed a small boost in revenues at Arizona facilities versus the same time a year earlier.

In fact, the STR report shows Arizona hotel and motel occupancy actually slipped by 1.2 percent. What kept the cash flow in the black was that they were able to boost their room rates up an average of 1.7 percent.

Hoffman said it's hard to know what's keeping spending on rooms in the state so anemic.

He said one possibility is the lasting effects of the state's adoption in 2010 of SB 1070.

That legislation, aimed at giving police more power to detain suspected illegal immigrants, gained nationwide attention and resulted in calls for boycotts. And while casual tourism was not affected, convention planners who are booking events three years out acknowledged that they had not only cancellations but also difficulty landing new business.

But Hoffman said the hospitality industry also could be the victim in some perverse way of the overall improving Arizona economy.

"Maybe people are feeling a little bit better and doing what they used to do and going back to San Diego,' he said, rather than settling for "staycations' close to home at a local resort. And that, he said, also would keep down year-over-year spending on restaurants.

The most surprising thing overall, said Hoffman, is the sharp increase in consumer spending despite the fact the state's jobless rate remains at 8 percent, more than double what it was before the recession.

"We're growing retail at a 9 percent clip with very little growth in workers,' he said.

"But the people that are working, guess what?' Hoffman continued. "They must be buying cars, they're buying furniture and home furnishings, they're buying clothing and accessories. They tend to be shopping at a pretty good clip.'

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