Latest sales tax report shows Arizonan consumer spending up 8.2 percent - East Valley Tribune: Business

Latest sales tax report shows Arizonan consumer spending up 8.2 percent

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Posted: Thursday, May 23, 2013 7:01 am | Updated: 7:40 am, Mon May 27, 2013.

Forget fears of sequestration. And never mind the hike in payroll taxes that shrunk paychecks.

A new report from the state Department of Revenue shows Arizonans are spending at pre-recession levels. And they're opening up their wallets not just for new clothes but for major purchases like furniture and vehicles.

That report of April sales tax receipts, which covers consumer spending in March, found taxable sales at $4.78 billion. That is 8.2 percent higher than the same period a year earlier.

That's not an anomaly, according to economist Dennis Hoffman of the W.P. Carey School of Business at Arizona State University. He said that is pretty much in line with what he's seen since the beginning of the year.

Helping to spur all that is the enhance desire of Arizonans to drive something new, or at least different.

Hoffman said some of what has been seen as the economy has recovered is a function of pent-up demand. He said motorists, unwilling to take on new debt during the recession, made do with what they had.

But Hoffman said the spike of purchases is more than a function of the old car simply wearing out and this pent-up demand that went unmet for years.

"Auto deals are great right now, interest rates are low,'' he said.

Hoffman said, though, with gasoline prices still in the mid $3 range, people are looking for fuel efficiency. More to the point, manufacturers have responded.

"You can get a decent sedan that gets 35, 40 miles to the gallon now,'' he said. "You don't have to buy a Prius to get that kind of improvement.''

Overall, vehicle sales figures are the best they've been since late 2007.

It's not just vehicle sales, though, driving growth. He said consumers are spending more on "discretionary'' items -- things that are not necessities like clothing and even building supplies.

But what about the federal budget stalemate and the sequestering of dollars to reduce spending?

Hoffman said that hasn't really hit Arizona, at least not yet. But he warned that it remains an issue, what with federal spending amounting to $85 billion a year in the state.

"We remain at risk,'' he said.

Hoffman said there was some "hesitation'' in state spending earlier in the year after the end of the payroll tax holiday. That put the levy back at 6.2 percent, up from the 4.2 percent level it had been at for the prior two years, reducing weekly paychecks by anywhere from $10 to $20 a week for most.

But he said people seem to have acclimated adjusted to the initial adjustment. And what also helped boost March sales, Hoffman said, is that tax refund checks went out later than normal.

"We appear to have found our footing and folks are back at the stores,'' Hoffman said.

He acknowledged the state's unemployment rate continues to languish at just below 8 percent, calling the pace of job creation "horrible.''

Hoffman said, though, there are other signs showing total personal income on the rise. What that means, he said, is those fortunate enough to have a job are getting raises, working overtime or getting bonuses.

He said one thing to watch is whether consumers hold back on major purchases until June. That is because the temporary 1 percent sales tax approved by voters in 2010 self-destructs at the end of May. And Hoffman said $300 on a $30,000 vehicle might be just enough incentive to keep the current set of wheels a bit longer.

He said, though, that dealers may seek to counteract that with special deals this month and next to keep the buyers coming in the door.

The new figures also show a 4.4 percent year-over-year increase in spending in bars and restaurants.

Elaine Smith, an economist with the Arizona Department of Revenue said April collections are typically high, what with spring training and winter visitors. But she noted this increase is on top of a record set last April.

There are some areas of the economy that continue to lag. That includes residential construction, with sales figures still hovering at about a quarter of what they were in 2006.

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