Retail Sales Decline Again in California
Although retail sales are showing dramatic signs of new life nationwide, California consumers are still shying away from shopping malls, auto dealers and cash registers of all types, leaving the state mired in its worst financial downturn in 50 years.
According to as-yet-unreleased figures from the state Department of Finance, taxable sales in California dropped 3% in the first three months of 1992, marking the state’s fifth straight quarterly decline in consumer spending.
Further, economists and state officials predict that what has become the longest and steepest drop in the state’s retail activity since the Great Depression will continue at least through the end of this year--and possibly through 1993.
“We think it could be 1994 before we see any signs of recovery in California,” a spokeswoman for the state Department of Finance said.
Last year, taxable retail sales fell about 3.8% below those in 1990. The decline does not take into account the effects of inflation, which ran at a rate of about 3% to 4% during the year. Taxable sales are an important gauge of the state’s economic health, because the sales taxes they generate are the second-largest source of income to the state, behind only income taxes, and the largest source of revenue to most local governments.
Taxable retail sales in the first three months of this year were about equal to the $62.4 billion recorded in the same period last year. However, in 1992, about 3% more of California’s sales are subject to the state sales tax, including snack foods and periodicals.
Merchants throughout the nation agree that California, once home to their top-performing stores, no longer is at the top of their sales charts.
“Our stores in California have run ahead of the pack since we opened our first store there in 1978,” said Jack McMillan, co-chairman of Nordstrom. “Now they are trailing the chain.”
It’s a big reversal in fortunes that McMillan doesn’t see unwinding in the near future. “We hope it will get better in the second half of the year,” he said, “but frankly we don’t see any hard evidence of that yet.”
In addition to leaving merchants wringing their hands, the decline in spending has left the state and local governments with billion-dollar budget deficits and the prospects of a new round of public employee layoffs this summer, as elected officials grapple with balancing their budgets for the upcoming fiscal year.
Those layoffs could, at best, offset any nascent recovery in the state or, worse, spark a new round of job loss fears that would only deepen the state’s financial woes.
Such projections prompt economists to exclude California from the recovery that many believe is gathering momentum throughout the rest of the nation.
“California’s retail environment will remain weak at the very best for the next three to six months,” said David Hensley, director of the UCLA Business Forecast.
Added Fred Cannon, senior economist at Bank of America in San Francisco: “Until we have consistent job gains, there will be no real recovery.”
Los Angeles County, ravaged by aerospace layoffs, record office vacancies and now the worst urban riots in a century, remains the hardest hit area in the state, economists agree. According to the state Franchise Tax Board, retail sales in the county fell an average of about 6.3% during the first nine months of 1991.
Although the state has not yet released the county figures for the last six months, Jeff Reynolds of the state Franchise Tax Board said the decline has continued and is expected to stay in its downward path for at least the next six months.
“Even if the state’s economy begins to stabilize and then pick up later this year, Los Angeles will continue to hurt. We haven’t hit bottom yet,” said Lynn Reaser, chief economist for First Interstate Bank in Los Angeles. “And any help we might have gotten from tourists this summer is probably gone because of the riots.”
