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Florida Economic Update: Outlook for Retail Sales for 2008-2009

Florida Economic Update: Outlook for Retail Sales for 2008-2009. By: Tony Villamil, CEO The Washington Economics Group, Inc. Retail Days at the Capitol & Board Meeting Doubletree Hotel Tallahassee, Florida March 4-7, 2008. Agenda.

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Florida Economic Update: Outlook for Retail Sales for 2008-2009

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  1. Florida Economic Update: Outlook for Retail Sales for 2008-2009 By: Tony Villamil, CEO The Washington Economics Group, Inc. Retail Days at the Capitol & Board Meeting Doubletree Hotel Tallahassee, Florida March 4-7, 2008

  2. Agenda • Status of Economic Modeling Project to Forecast Retail Sales by Product Category • Outlook for Macro Drivers of Florida’s Economy • Outlook for Drivers of Retail Sales Based on Forecast Model • Trends in Taxable Retail Sales • Conclusion

  3. Macro Drivers of Florida’s Economy Drivers of Retail Sales Retail Sales Activity

  4. Status of Model to Forecast Retail Sales in Florida Preliminary Findings • Population growth and per capita income change account for a statistically significant 87 percent of the change in total retail sales in Florida • Consumer expectations on the economy, together with month of the year, account for 12 percent of the expected changes in retail sales • A 1 percent change in population changes retail sales by 4/10th of 1 percent in the short run, and 9/10th of 1 percent in the long run • A 1 percent change in real per capita income changes retail sales by 1/2 a percent in the short run and by slightly above 1 percent in the long run

  5. Drivers of Retail Sales • Drivers suggest a moderate recovery in retail sales, starting in 2009 • A return to strong expansion is unlikely until 2010

  6. Florida Population Growth2001-2007 Source: U.S. Bureau of Census. • Population growth is a key driver of retail sales • Growth has slowed from 2 to 2½% in the “boom” years of 2003-2006 to an estimated 1% in 2007 and 2008 • Fundamentals suggest a 1½% growth in population through 2010

  7. Florida Per Capita Personal Income Trend Source: Florida Research and Economic Database. • Per Capital Personal Income grew strongly, in the 6 to 7% annual rate from 2003-2006, stimulating the expansion of retail sales in most product and services categories • This key driver is forecast to expand at a slower 4 to 5% annual rate in 2008-2010 – back to trend growth

  8. Recent Florida Taxable Sales Performance Reflects Much SlowerExpansion of Economic Activity in 2007-2008

  9. Florida Taxable Sales(December 2007/December 2006) Tendency Source: Florida Economic and Demographic Research. • At end 2007 (December) taxable sales were below the level achieved in December 2004 as population growth, per capita personal income and consumer expectations impact retail purchases • Taxable sales were down a significant 6.9% between December 2007/December 2006 – trend is continuing in first half of 2008 • Most of the declines occur in consumer durables, autos and accessories and construction-related sales

  10. Regional Performance of Taxable Sales in Florida(Dec 2007/Dec 2006) Indicative of smaller regional economies with large dependence on real estate [continued]

  11. Bottom Line: Outlook for 2008-2009 • Florida macro drivers suggest a moderate upturn starting in 2009 • U.S. economic activity likely to pick up • Global economic growth expected to remain moderate • Florida business climate: property insurance and tax issues • Improvement in Florida macro drivers leads to: • Slight increase in population growth to 1½% • Moderate increase in personal income per capita • Improvement in consumer expectations, especially “big ticket” purchases • Retail sales forecast growth • 2½% -- 2008 • 5% to 6% -- 2009

  12. The Washington Economics Group, Inc. 2655 LeJeune Road, Suite 608 Coral Gables, Florida 33134 Phone: 305-461-3811 www.weg.com info@weg.com

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