State sales tax figures show that consumer spending grew throughout most of the Capital Region for the first three quarters of 2008, despite record high gasoline prices, food price inflation and looming troubles on Wall Street.
Stephen Schmidt, the chairman of the Union College economics department, said the Capital Region so far has shown resilience in the face of most of the economic problems affecting the national and state economies.
“Consumer spending is about 70 percent of the total economic output,” Schmidt said. “Upstate New York is not as bad as the rest of the rest of the country because the housing prices haven’t collapsed here. A general economic slowdown is going to hurt us a little bit, but since the main industry here in the Capital District is government, we’re somewhat immune from this.”
Sales tax numbers show strong growth in year-over-year spending in Albany, Schenectady and Saratoga counties for the first three quarters, each with more than 5 percent growth. Montgomery County had 3.1 percent growth in sales tax, and Schoharie County had 3.3 percent growth.
Kajal Lahiri, a University at Albany economics professor with expertise in New York state’s economy, said since New York does not charge sales tax on food and doesn’t charge state sales tax beyond the first $2 per gallon of gasoline, sales tax figures are sheltered from the two greatest drivers in inflation, so growth can be attributed to consumer sentiment.
“In the last quarter, certain things were looking not that bad actually because most of the recent Wall Street debacle came over the last month,” Lahiri said.
Sales tax totals in Fulton County shrunk by 1.5 percent year-over-year for the first three quarters. Fulton County Treasurer Bruce Ellsworth said a positive third quarter, in which Fulton County saw 1.9 percent growth over the third quarter sales tax figures for 2007, was not enough to overcome two very weak quarters to start the year.
“This was tourism season, so we expect it to be up. The third and fourth quarter are naturally the highest quarters,” Ellsworth said. “I’m guessing we’re gong to finish down for the year in the neighborhood of between $200,000 and $300,000.”
Alison Swartz, director of tourism development for the Fulton County Regional Chamber of Commerce and Industry, said higher gasoline prices over the summer may have helped Fulton County tourism during the third quarter because local people were less inclined to travel outside the area and that boosted local spending.
In Schoharie County, the outlook was worse for the third quarter. After sales tax revenues in Schoharie County appeared to be moving up this summer compared to last year, a sudden drop of about $368,000 in September pushed total third quarter revenue down about 4.7 percent from the same period in 2007, according to county Treasurer William Cherry.
The county’s 4 percent sales tax revenue distributed from the state totaled $3,663,394 for the three months ending Sept. 30, Cherry said. That compares to $3,843,689 in the same quarter in 2007, a drop of $180,295. The reason is unclear, Cherry said, although he speculated that the nationwide decline in new car sales likely played a role because of the significant amount a new or used car purchase contributes in sales tax to state and local coffers.
Although for several years after the turn of the century, both sales tax and property tax revenues related to new housing or land subdivisions were rising by more than $1 million per year, figures have been flat over the past two or three years, according to Cherry.
In 2004, the actual sale tax revenue received by the county was about $10.9 million. In 2005, it was $12.7 million, an increase of $1.8 million in one year, Cherry said. In 2006, sales tax totaled $13.7 million.
“Then we leveled off,” he said. “The good news is we’re still on track to hit our target for 2008.”
Cherry had budgeted for $13,775,000 in sales tax revenue this year. The tentative 2009 budget projects just more than $14 million, Cherry said, “but now it doesn’t appear that we’re going to hit that.”
Albany and Schenectady counties each had spikes in sales tax generated in September. Albany County collected $25.7 million, up from $21.5 million in September 2007, and Schenectady County collected $9.5 million, up from $7.6 million in September 2007. One possible reason for the increase could actually be an increase in car sales prompted by General Motors’ attempt to increase sales in the third quarter by offering employee pricing on many models.
UAlbany’s Lahiri agreed with Cherry that car sales are typically major drivers for sales tax receipts. He said it remains to be seen how the recent financial troubles will affect the fourth quarter holiday shopping season.
“It’s affecting the psychology of the consumer now very badly,” Lahiri said. “That’s bad news for the economy because it’s consumer demand that supports the economy.”