Iowa State reports find statewide retail sales are stabilizing after economic downturn

AMES, Iowa -- Retail sales in most Iowa regions appear to have stabilized over the past fiscal year following a substantial downturn during the recession, according to new reports produced by Liesl Eathington, an assistant scientist in Iowa State University's Department of Economics

ISU's annual retail trade analysis is based on state-reported sales of goods and services subject to Iowa's statewide sales tax. The analysis is used to create reports for all of Iowa's communities and counties. The new reports include retail performance statistics through fiscal year 2011 (ended June 30, 2011).

Eathington found a slight growth in Iowa retail sales over the last fiscal year.

"Statewide, average per capita sales from fiscal year '10 to '11 were fairly flat, growing less than one percent. Still, that was an improvement from the 6.5 percent drop we experienced the year before," said Eathington, who is director of Iowa State University's Regional Economics and Community Analysis Program. "And although it was slow, the growth was fairly widespread. More than half of Iowa's counties experienced growth in real per capita sales in the last year."

Assigning counties to peer groups

Eathington's analysis assigns all Iowa counties to peer groups based on their metropolitan or micropolitan status and other population characteristics. Metropolitan statistical areas (MSAs) are defined around a core city or cities that have 50,000 or more residents. Iowa's nine MSAs comprise 10 core cities and contain 20 of the state's 99 counties. They accounted for 64.1 percent of the state's taxable sales.

"The longer-term trend is that trade continues to consolidate into our core metro counties [such as Polk, Linn and Johnson]," Eathington said. "Their share of the total sales is just continuing to tick upward steadily each year."

Micropolitan statistical areas are defined around core cities with 10,000 to 49,999 residents. Of Iowa's 79 non-metropolitan counties, 17 are contained within 15 micropolitan statistical areas. While they account for 15.5 percent of the state's taxable sales, their retail sales are lagging. Those counties averaged a slight decline of 0.6 percent in real per capita sales during the last fiscal year.

"The places that seem to be hurting most recently are the micropolitan areas -- such as Mason City and Ft. Dodge," she said. "These are places that were really hit pretty hard during the recession with a lot of manufacturing job losses. And there does look to be some stress in terms of the retail sector in those places."

Eathington's analysis found some positive news for Iowa's rural areas. The state's 21 most rural counties, none of which has a city larger than 2,500 residents, posted a 4.0 percent increase in real per capita sales from fiscal year '10 to '11. While these counties capture just a small fraction of retail activity, accounting for 3.2 percent of Iowa's taxable sales, their share has remained stable throughout the last decade.

The impact of rising internet sales

Eathington warns that rising internet sales may have an impact on Iowa's future retail outlook.

"That's continuing to slightly erode the amount Iowans spend in the state on taxable goods and services," she said. "We can't really measure how much it's affecting trends in statewide sales tax collections, in part because the basket of goods and services that we tax now is different than even just 10 years ago. Those changes make it harder to isolate the possible effects of internet sales."

Even though it appears Iowans are spending again, Eathington doesn't necessarily consider that to be the most significant sign of the state's overall economic health.

"Growth in consumer retail spending lags improvements in household economic well-being," Eathington said. "I'd usually rather look at employment and earnings to tell us how we're doing [with the economy] rather than retail sales. That's why the ISU retail trade analysis reports include more than just retail indicators -- to give people a broader sense of how their local economy is performing."