Wednesday, December 22, 2010

Michigan Goes Shopping

There is a certain bit of cognitive dissonance that sets in when you have stories about high unemployment and the great need that exists in our state, and then you see a story such as this that shows a major jump in consumer spending... it hurts your head. And again, I don't really want to promote rampant consumption of more "stuff" - but this confidence shows recovery is taking place out there, slowly but surely.

After improved sales in November, Michigan retailers reported "upbeat" forecasts for the 2010 holiday season, which the Michigan Retails Association said “might turn out to be the best holiday shopping season in several years.”

The Michigan Retail Index for November experienced the best year-over-year sales gain of any month since 1999, the association reported today. Last month, the sales index jumped to 68.1, compared to November 2009’s 39.7.

November’s index also was up significantly from 51.0 in October 2010 and 56.7 in September. Sales increased in all regions of Michigan and across most trade lines.

Retailers are giddy, and expect this to continue into the next year.

The sales outlook index — which reports predictions for December through February — is strong, as well, at 73.2, up from 67.4 in October and 56.3 in September. Last November, the sales outlook index was at 56.7.

“The Michigan economy is showing signs of life,” Hallan said. “Consumers appear to be feeling more confident about the future and making purchases they had put off in recent years.”

This equates to more $$ towards the state's bottom line, and it showed in the November revenue report from the Senate Fiscal Agency yesterday. While business and real estate tax collections were down and that is dragging overall revenue collections down (not good - it's complicated, go read the link for an explanation), income and sales tax collection saw a significant increase last month.

Net income tax revenue totaled $588.3 million in November, up 4.5% from the November 2009 level. Income tax collections have risen above the year-ago level for four consecutive months and were $30.9 million above the monthly forecast. Income tax withholding payments rose 3.1% above the year-ago level in November, to $595.5 million, as stable employment and increases in the average number of hours worked have improved withholding tax collections.

Sales tax receipts totaled $569.7 million in November, 9.0% above the November 2009 level. It was the eighth out of the last 11 months that sales tax growth has exceeded growth in withholding. Sales tax collections from motor vehicle transactions were 13.3% above the year-ago level, the third consecutive month that sales tax collections from motor vehicle transactions have exceeded the year-ago level.

Because of the problems with the MBT, we are taking a hit to the General and the School Aid Fund for FY2010-11, November being the first month of reporting on the new budget. And, who knows what Snyder has in mind on his plan to cut revenues even further, but whatever that is, it's going to hurt schools, public safety and health care. There isn't any fat left to trim, and already he is threatening "painful" cuts that he wouldn't tell you about when he was campaigning - so stay tuned. Massive cuts could upset consumer confidence, and we could go back to negative territory when people snap those wallets shut out of fear.

So for now, go shopping and help out the team. Yes, that is such a Bush thing to say, I know, but what choice do we have at this point?