Taxable sales dip again in Nevada after spring rise

An important statewide economic indicator dipped back into the doldrums in May after a short-lived improvement earlier in the spring.

The state's businesses took in $3.13 billion in taxable sales in May, down 1.9 percent when compared with taxable sales in May 2009, the state Department of Taxation said Tuesday. Taxable sales in Clark County dipped 1.4 percent, to $2.34 billion.

Taxable sales peaked at $4.7 billion statewide in December 2006.

May's decline follows April's sales increase of 2 percent statewide and 3.5 percent in Clark County. April turned in Nevada's first year-over-year taxable-sales growth in two years.

But the latest falloff isn't necessarily a sign of worse trends to come: It's typical for economic indicators to alternate between growth and contraction before a recovery sets in, said Bob Potts, assistant director of the Center for Business and Economic Research at the University of Nevada, Las Vegas. Plus, May's decline is well below the double-digit percentage drops that characterized 2009.

"For the last couple of months, we're basically at no change, so the good news is, the rate of decline has significantly dropped," Potts said. "Everyone wants to call it the bottom, but I'd rather call it a holding pattern, because we don't know if the numbers will go back up or drop down again. One or two months of data, especially when they offset each other, can't tell us the direction we're headed in."

Jeremy Aguero, a principal in local research and consulting firm Applied Analysis, said taxable-sales numbers have joined several other key local indicators, including home prices and job formation, that have bounced around in flat territory in recent months, with neither noticeable gains nor sizeable declines.

"The serious slide we were on before has come to an end, which is good news," Aguero said. "The bad news, however, is that many of those jobs that were supported by the levels of consumer spending we saw in 2007 and 2008 are showing no signs of coming back anytime soon."

An amnesty initiative designed to bring in unpaid taxes gave May's numbers a boost: Without the program, Nevada's taxable sales would have stumbled 2.9 percent year over year, coming in at $3.1 billion.

The amnesty program will continue through Sept. 30, so the next few taxable-sales reports will include data padded by back taxes.

Also helping May's sales figure is the month's comparison to May 2009. Taxable sales from a year earlier tumbled 21.1 percent statewide and 21.9 percent in Clark County, so the latest statistic is measured against an especially bad period in 2009.

Several consumer-oriented categories showed major sales increases in May.

In the accommodation sector, which includes hotels and motels, sales jumped 23 percent. Among clothing and accessories stores, sales rose 10.7 percent. Professional scientific and technical services posted a 19.3 percent sales boost, while telecommunications experienced a 14 percent rise. Sales inside electronics and appliance stores spiked 15.8 percent.

At Ace Appliance on Nellis Boulevard, sales have headed upward in 2010, said the store's owner, who declined to give his name.

Though Ace doesn't track sales changes by percentage, the store's sales have been improving for roughly a year, the owner said. He credited the gains in his business to investors who must replace appliances after they purchase homes and find the properties stripped of refrigerators and other big-ticket items.

But several other key categories saw sales drops, and those decreases offset gains in other areas.

Construction continued to lose ground, shedding 31.6 percent from its sales base year over year, though that's an improvement on the 55 percent drops the sector posted in 2009.

Dealers of cars and car parts saw sales slip 1.7 percent, while general-merchandise retailers, including department stores, posted a 0.3 percent drop. Sales inside grocery stores were off 7.2 percent.

Collections on cigarette taxes remained below expectations, while collections on liquor taxes were well above projections.

In all, 12 of Nevada's 17 counties saw declines in year-over-year taxable sales in May.

For the state's sales climate to trend upward consistently, consumers will need more discretionary income and less household debt, Aguero said. Inflation, which has largely been held in check but which could begin to emerge in coming months, would also push up taxable-sales values, though rising inflation would hurt consumers, Aguero said.

Gov. Jim Gibbons also took note of the overall stabilization in taxable sales, and pointed out that the moderation happened despite record unemployment.

"This administration remains committed to addressing these challenges by streamlining operations, improving customer services and maximizing the use of taxpayer dollars," Gibbons stated.

Revenue collected from taxable sales helps fund schools and prisons, among other public services.

Gross revenue collections on sales fell 3.3 percent year over year in May, to $248.4 million. In the first 11 months of fiscal 2010, taxable sales were off 5.8 percent year over year.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.