County’s Growth in Taxable Retail Sales Lags Behind State

Growth in taxable retail sales in Orange County during the first quarter dropped below the state average for the first time since 1982, reflecting a slowdown in sales activity throughout Southern California.

Figures released by the State Board of Equalization show that the dollar value of taxable retail transactions in the county during the first 3 months of the year hit $5.74 billion, up 6.2% from the first quarter of 1987. For the same period, taxable sales in the state hit $57 billion, up 6.9%.

When adjusted for a 4.5% inflation rate, however, the figures show only a moderate level of real spending increases over the prior year’s first quarter.

The only other time in recent years that the county’s sales growth rate failed to outstrip the state’s was in the fourth quarter of 1982, at the height of an economic slump caused by declining oil prices. Sales for that period increased 2.2% in Orange County and 2.8% statewide.

Generally Tops State

Since the first quarter of 1986, the county’s quarterly sales tax growth rate generally has been at least a full percentage point ahead of the state’s.

The slowdown during the first quarter of this year was caused largely by very slow growth in spending on apparel, specialty goods, retail building supplies, liquor, prepared take-out foods and taxable items sold in food stores.

Sales of luxury items like jewelry, boats, airplanes and motorcycles and non-necessities like books, stationery, packaged liquors and automotive accessories actually declined from the levels reported for the first quarter of 1987.

“It is hard to tell exactly what the causes were,” Chapman College economist James Doti said after a quick review of the figures, “but it is possible that this shows the impact of the stock market crash” of Oct. 19, 1987.

“These figures are for the first full quarter after that, and with the declines in spending on luxury items, it looks like it reflects a cautious attitude on the part of consumers.”

Housing Costs Discounted

Doti discounted the idea that the spending decline could be related to the increasing cost of housing in the county as disposable income is eaten up by ever-larger mortgage payments.

Historically, he said, housing sales have spurred retail spending in the county, even when home prices have appreciated at double-digit rates, as they have been doing for more than a year now.

The figures--for Orange County and for the rest of Southern California--do show, however, that spending has slowed in Southern California in the past year, up only 5.9% for the region, while it has picked up considerably in the San Francisco Bay Area, up 9.5%, and the San Joaquin Valley and central coastal counties, up 8.9%.

The disparity in part is due to population increases in what had been sparsely populated areas of those regions, said David Hayes, a researcher for the State Equalization Board.

Southern California, however, still accounts for about 60% of all taxable retail sales in the state, and Orange County is maintaining its historic position as the second-largest county for taxable sales.

Los Angeles County, with about four times the population of Orange County, was first with $16.87 billion in taxable sales, or just under three times the value of sales in Orange County.

The year-to-year gain for Los Angeles County was only 5.1%.