HomeMy WebLinkAbout2018 Sales Tax Digest First Quarter
CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR
November 26, 2018
The Honorable City Council
Palo Alto, California
City of Palo Alto Sales Tax Digest Summary First Quarter Sales (January
- March 2018)
We received $6.0 million for first quarter sales of 2018 which is $1.1 million (15.9 percent) less
than the same quarter of 2017. The following files are attached for this informational report for
which no action is required.
ATTACHMENTS:
• Attachment A: Avenu Sales Tax Digest Summary (PDF)
• Attachment B: Economic Categories and Segments (PDF)
• Attachment C: Avenu Economic News and Trends (PDF)
Department Head: Harriet Richardson, City Auditor
Page 2
City of Palo Alto
Sales Tax Digest Summary
Collections through June 2018
Sales through March 2018 (2018Q1)
www.avenuinsights.com (800)800-8181 Page 1
California Overview
The percent change in cash receipts from the prior year was 2.7% statewide, 3.3% in Northern California
and 2.2% in Southern California. The period’s cash receipts include tax from business activity during the
period, payments for prior periods and other cash adjustments. When we adjust for non-period related
payments, we determine the overall business activity increased for the year ended 1st Quarter 2018 by
2.1% statewide, 1.6% in Southern California and 3.0% in Northern California.
City of Palo Alto
For the year ended 1st Quarter 2018, sales tax cash receipts for the City decreased by 1.7% from the
prior year. On a quarterly basis, sales tax revenues decreased by 15.9% from 1st quarter 2017 to 1st
Quarter 2018. The period’s cash receipts include tax from business activity during the period, payments
for prior periods and other cash adjustments.
Excluding state and county pools and adjusting for anomalies (payments for prior periods) and late
payments, local sales tax increased by 5.7% for the year ended 1st Quarter 2018 from the prior year. On
a quarterly basis, sales tax activity increased by 13.4% in 1st Quarter 2018 compared to 1st quarter
2017.
Regional Overview
This seven-region comparison includes estimated payments and excludes net pools and adjustments.
% of Total / % Change
City of Palo
Alto
California
Statewide
S.F. Bay
Area
Sacramento
Valley
Central
Valley South Coast Inland
Empire North Coast Central
Coast
General Retail 32.1 / -4.5 27.5 / 0.0 25.4 / -1.4 26.5 / 0.3 30.7 / 3.4 28.4 / -0.4 26.7 / 2.2 27.0 / -2.4 29.5 / -7.1
Food Products 18.7 / -1.3 21.2 / 3.1 22.4 / 2.4 17.7 / 5.6 16.4 / 3.0 22.8 / 3.4 17.5 / 3.2 18.4 / 0.9 31.4 / -3.4
Construction 1.8 / -39.6 9.9 / 7.5 10.0 / 7.3 12.8 / 10.9 12.3 / 9.0 8.7 / 7.0 10.9 / 6.1 14.6 / 10.3 8.6 / -8.5
Business to Business 23.6 / 37.3 16.3 / 0.4 19.3 / 0.1 13.4 / 2.7 13.4 / 13.3 15.8 / -1.9 16.4 / 1.9 8.1 / 0.3 5.9 / -7.7
Miscellaneous/Other 23.7 / 9.1 25.1 / 2.7 22.9 / 5.1 29.6 / 4.2 27.2 / 4.3 24.3 / 0.8 28.5 / 3.4 31.9 / 5.5 24.6 / 5.7
Total 100.0 / 5.7 100.0 / 2.1 100.0 / 2.0 100.0 / 4.0 100.0 / 5.5 100.0 / 1.1 100.0 / 3.1 100.0 / 2.6 100.0 / -3.2
City of Palo
Alto State Wide S.F. Bay
Area
Sacramento
Valley
Central
Valley South Coast Inland
Empire North Coast Central
Coast
Largest Segment Restaurants Restaurants Restaurants Auto Sales -
New
Department
Stores Restaurants Restaurants Auto Sales -
New Restaurants
% of Total / % Change 16.8 / 1.5 15.2 / 3.4 16.1 / 2.8 12.4 / 1.9 12.9 / 2.0 16.9 / 3.7 11.6 / 3.8 12.2 / 3.7 22.3 / -4.7
2nd Largest Segment Auto Sales -
New
Auto Sales -
New
Auto Sales -
New Restaurants Restaurants Auto Sales -
New
Auto Sales -
New
Service
Stations
Auto Sales -
New
% of Total / % Change 16.4 / 6.6 11.2 / 1.3 11.4 / 5.3 11.8 / 4.4 10.7 / 3.4 11.1 / -1.0 10.8 / 0.4 11.5 / 15.2 11.9 / 14.8
3rd Largest Segment Leasing Department
Stores
Department
Stores
Department
Stores
Auto Sales -
New
Department
Stores
Department
Stores Restaurants Miscellaneo
us Retail
% of Total / % Change 9.3 / 28.8 9.2 / 0.9 7.4 / 0.2 10.6 / 2.8 10.7 / 3.8 8.9 / 0.3 10.2 / 2.5 10.7 / 0.8 10.0 / -5.0
*** Not specified to maintain confidentiality of tax information
CITY OF PALO ALTO
ECONOMIC CATEGORY ANALYSIS FOR YEAR ENDED 1st QUARTER 2018
ECONOMIC SEGMENT ANALYSIS FOR YEAR ENDED 1st QUARTER 2018
BENCHMARK YEAR 2018Q1 COMPARED TO BENCHMARK YEAR 2017Q1
Attachment A
City of Palo Alto
www.avenuinsights.com (800)800-8181 Page 2
Gross Historical Sales Tax Performance by Benchmark Year and Quarter (Before Adjustments)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
BENCHMARK YEAR QUARTERLY
Net Cash Receipts for Benchmark Year 1st Quarter 2018: $28,843,483
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2018Q1 BMY is sum of 2018 Q1, 2017 Q4, Q3, Q2)
Attachment A
City of Palo Alto
www.avenuinsights.com (800)800-8181 Page 3
Restaurants
16%
Leasing
10%
Department Stores
8%
Furniture/Appliance
6%Food Markets
2%Recreation Products
1%
All Other
52%
Net Pools &
Adjustments
5%
TOP 25 SALES/USE TAX CONTRIBUTORS
The following list identifies Palo Alto’s Top 25 Sales/Use Tax contributors. The list is in alphabetical order
and represents the year ended 1st Quarter 2018. The Top 25 Sales/Use Tax contributors generate 53.7%
of Palo Alto’s total sales and use tax revenue.
Anderson Honda Lucile S.Packard Chldrn Hosp/Stfd Stanford University Hospital
Apple Stores Macy's Department Store Tesla Lease Trust
Audi Palo Alto Magnussen's Toyota Of Palo Alto Tesla Motors
Bloomingdale's Neiman Marcus Department Store Tiffany & Company
Bon Appetit Management Co.Nest Labs Urban Outfitters
Fry's Electronics Nordstrom Department Store Usb Leasing
Hewlett-Packard Shell Service Stations Varian Medical Systems
Houzz Shop Space Systems Loral Volvo Cars Palo Alto
Integrated Archive Systems
Sales Tax from Largest Non-Confidential Economic Segments
Attachment A
City of Palo Alto
www.avenuinsights.com (800)800-8181 Page 4
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
Benchmark Year 2018Q1 Benchmark Year 2017Q1
Attachment A
City of Palo Alto
www.avenuinsights.com (800)800-8181 Page 5
Historical Analysis by Calendar Quarter
Economic Category % 2018Q1 2017Q4 2017Q3 2017Q2 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3
General Retail 30.8% 1,851,152 2,635,136 1,860,347 1,952,490 1,684,023 2,784,731 1,983,231 2,141,794 1,673,846 2,526,551 1,935,178
Miscellaneous/Other 25.3% 1,516,808 1,881,732 1,602,213 1,301,138 1,392,756 1,621,044 1,727,134 1,617,307 1,413,133 1,491,158 1,609,541
Food Products 19.7% 1,183,895 1,206,578 1,184,645 1,189,257 1,192,662 1,235,801 1,213,382 1,194,369 1,126,103 1,166,195 1,146,174
Business To Business 27.3% 1,639,073 1,569,619 1,448,336 1,284,056 1,240,962 1,004,883 1,027,730 1,140,526 974,162 1,428,210 888,609
Net Pools & Adjustments -3.1% -183,952 1,136,075 1,374,372 1,210,511 1,631,125 1,351,709 831,377 1,313,745 1,072,794 1,226,261 1,060,979
Total 100.0% 6,006,976 8,429,141 7,469,913 6,937,453 7,141,528 7,998,168 6,782,854 7,407,741 6,260,038 7,838,375 6,640,481
Economic Segments % 2018Q1 2017Q4 2017Q3 2017Q2 2017Q1 2016Q4 2016Q3 2016Q2 2016Q1 2015Q4 2015Q3
Miscellaneous/Other 56.2% 3,373,907 3,791,527 3,233,434 2,986,873 2,910,133 2,939,228 3,027,081 2,973,047 2,607,097 3,237,983 2,720,241
Restaurants 17.4% 1,045,496 1,054,073 1,049,565 1,058,606 1,043,747 1,071,053 1,068,101 1,068,502 1,005,688 1,029,733 1,019,505
Miscellaneous Retail 6.9% 412,952 701,369 419,279 452,135 435,757 1,002,389 581,831 681,345 469,360 714,151 478,994
Department Stores 7.8% 471,419 642,666 458,066 510,561 392,565 641,541 491,433 546,629 435,470 714,831 553,325
Apparel Stores 6.5% 390,780 585,892 440,005 449,402 372,033 553,250 398,170 444,383 337,880 519,318 397,534
Service Stations 2.7% 163,072 148,906 147,499 159,371 119,552 130,396 138,155 144,735 123,004 140,758 173,082
Food Markets 2.0% 117,783 128,671 117,256 112,566 131,676 145,179 126,755 109,108 104,676 116,778 113,092
Business Services 2.6% 155,193 157,861 173,439 75,722 43,548 102,095 47,066 65,510 51,647 76,156 51,885
Recreation Products 1.0% 60,326 82,100 56,998 76,514 61,392 61,328 72,885 60,737 52,422 62,406 71,844
Net Pools & Adjustments -3.1% -183,952 1,136,075 1,374,372 1,055,702 1,631,125 1,351,709 831,377 1,313,745 1,072,794 1,226,261 1,060,979
Total 100.0% 6,006,976 8,429,140 7,469,913 6,937,452 7,141,528 7,998,168 6,782,854 7,407,741 6,260,038 7,838,375 6,640,481
*Net Pools & Adjustments reconcile economic performance to periods’ net cash receipts. The historical amounts by calendar quarter: (1) include
any prior period adjustments and payments in the appropriate category/segment and (2) exclude businesses no longer active in the current
period.
Attachment A
City of Palo Alto
www.avenuinsights.com (800)800-8181 Page 6
Quarterly Analysis by Economic Category, Total and Segments: Change from 2017Q1 to 2018Q1
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Campbell -8.1% 5.5%9.1% 20.9% -15.0% 2,180,126 2,156,402 1.1%Business Services Heavy Industry Service Stations Office Equipment
Cupertino -1.1% 3.8% -56.2% -5.8% -1.8% 5,136,539 5,583,708 -8.0%Business Services Restaurants Office Equipment Bldg.Matls-Whsle
Gilroy -1.5% 2.5% -1.7% 3.5% -1.1% 3,400,073 3,416,533 -0.5%Heavy Industry Service Stations Leasing Health & Government
Los Altos -8.3% -4.3% 12.5% 8.7% 0.9% 526,091 545,333 -3.5%Restaurants Recreation Products Food Markets Drug Stores
Los Gatos -9.1% -5.8% -5.1% -30.1% -11.7% 1,342,174 1,497,048 -10.3%Furniture/Appliance Service Stations Auto Sales - New Miscellaneous Other
Milpitas 1.0% -4.0% 11.9% -28.2% 0.8% 4,690,227 5,125,995 -8.5%Bldg.Matls-Whsle Apparel Stores Office Equipment Electronic Equipment
Morgan Hill -3.4% 1.8% 30.7% -3.0% 6.6% 1,914,530 1,833,421 4.4%Bldg.Matls-Whsle Heavy Industry Electronic Equipment Miscellaneous Retail
Mountain View -6.3% 3.1% 92.7% -14.3% 10.3% 3,691,911 3,724,528 -0.9%Bldg.Matls-Whsle Service Stations Leasing Electronic Equipment
Palo Alto -13.5% -3.9% -48.3% 1.8% 14.8% 6,190,928 5,457,418 13.4%Auto Sales - New Light Industry Department Stores Leasing
San Jose -3.2% -4.0% 12.1% -4.9% 3.9% 34,329,832 34,429,615 -0.3%Bldg.Matls-Whsle Office Equipment Leasing Business Services
Santa Clara 1.2% -10.6% 6.2% -19.5% -7.9% 9,908,673 11,215,157 -11.6%Electronic Equipment Light Industry Office Equipment Business Services
Santa Clara Co.-4.2% -2.8% 5.8% -5.8% 1.4% 79,766,962 81,600,054 -2.2%Electronic Equipment Bldg.Matls-Whsle Office Equipment Leasing
Saratoga 12.1% -8.9% -12.3% 82.1% 1.7% 194,816 198,914 -2.1%Miscellaneous Retail Business Services Food Markets Restaurants
Sunnyvale -11.6% 2.8% 0.4% 43.7% -3.9% 6,257,542 5,560,343 12.5%Electronic Equipment Business Services Leasing Auto Sales - New
Attachment A
Economic Categories and Segments
Economic Category Economic Segment Description
Business to Business ‐ sales of
tangible personal property from
one business to another business
and the buyer is the end user.
Also includes use tax on certain
purchases and consumables.
Business Services Advertising, banking services,
copying, printing and mailing
services
Chemical Products Manufacturers and wholesalers
of drugs, chemicals, etc.
Electronic Equipment Manufacturers of televisions,
sound systems, sophisticated
electronics, etc.
Energy Sales Bulk fuel sales and fuel
distributors and refiners
Heavy Industry Heavy machinery and
equipment, including heavy
vehicles, and manufacturers and
wholesalers of textiles and
furniture and furnishings
Leasing Equipment leasing
Light Industry Includes, but is not limited to,
light machinery and automobile,
truck, and trailer rentals
Office Equipment Businesses that sell computers,
and office equipment and
furniture, and businesses that
process motion pictures and film
development
Construction Building Materials – Retail Building materials, hardware,
and paint and wallpaper stores
Building Materials ‐ Wholesale Includes, but is not limited to,
sheet metal, iron works, sand
and gravel, farm equipment,
plumbing materials, and
electrical wiring
Food Products Food Markets Supermarkets, grocery stores,
convenience stores, bakeries,
delicatessens, health food stores
Food Processing Equipment Processing and equipment used
in mass food production and
packaging
Liquor stores Stores that sell alcoholic
beverages
Restaurants Restaurants, including fast food
and those in hotels, and night
clubs
Attachment B
Economic Categories and Segments
Economic Category Economic Segment Description
General Retail – all consumer
focused sales, typically brick and
mortar stores
Apparel Stores Men’s, women’s, and family
clothing and shoe stores
Department Stores Department, general, and variety
stores
Drug Stores Stores where medicines and
miscellaneous articles are sold
Florist/Nursery Stores where flowers and plants
are sold
Furniture/Appliance Stores where new and used
furniture, appliances, and
electronic equipment are sold
Miscellaneous Retail Includes, but is not limited to,
stores that sell cigars, jewelry,
beauty supplies, cell phones, and
books; newsstands, photography
studios; personal service
businesses such as salons and
cleaners; and vending machines
Recreation Products Camera, music, and sporting
goods stores
Miscellaneous/Other Miscellaneous/Other Includes but not limited to
health services, government,
nonprofit organizations, non‐
store retailers, businesses with
less than $20,000 in annual gross
sales, auctioneer sales, and
mortuary services and sales
Transportation Auto Parts/Repair Auto parts stores, vehicle and
parts manufacturing facilities,
and vehicle repair shops
Auto Sales ‐ New New car dealerships
Auto Sales ‐ Used Used car dealerships
Miscellaneous Vehicle Sales Sale and manufacture of
airplanes and supplies, boats,
motorcycles, all‐terrain vehicles,
trailers and supplies
Service stations Gas stations, not including
airport jet fuel
Attachment B
ECONOMIC NEWS & TRENDS
July 18, 2018
www.avenuinsights.com
Attachment C
ECONOMIC NEWS & TRENDS July 18, 2018
2 www.avenuinsights.com
HIGHLIGHTS
National Economic Indicators / Influences
GDP: Partly due to soft spending in the first quarter, GDP
growth slowed. In 2017 consumer spending was up 6%;
the year before 3%. Real GDP increased 2.2% in 1Q2018
(was 2.9% in 4Q2017; 3.2% in 3Q2017, 3.1% in 2Q2017,
1.4% in 1Q2017, and 2.1% in 4Q2016). BOE analysts
predict a rise to 4% in Q22018.
Services Sector 1Q2018 Total Revenue: A decrease of
1.2% from 4Q2017 and up 5.2% from 1Q2017.
Personal Consumption Expenditures: Up 2.1% from
3Q2017.
Consumer Price Index: Prices rose for a third straight
month in June; sending inflation to its highest rate in
more than six years.
Inflation: December 2017 to December 2018: Current
headline rate of 2.9% will drop by December to 2.4%.
(Kiplinger, July 13, 2018)
Personal Savings: Falling to 3% in ’18 from 3.4% in ’17 as
a percentage of disposable income.
Recession Predictions: Despite persistent warnings
about the impending end of the current economic
expansion and the onset of another recession, U.S. GDP,
employment, income, industrial production, exports, and
business and consumer spending are all headed upwards
and nothing on the immediate horizon has enough force
to disrupt those trends. (Beacon Economics). A recession
in the next two to three years has increased significantly,
even if ongoing tensions with China don’t escalate into a
full-blown trade war. (Temasek Holdings)
Commercial Sectors/ Mall Value: Student housing,
manufactured homes and industrial property were the
top performers in the last three months; mall values in
June fell 9% over the past 12 months, and 18% since the
end of 2016. (WSJ, July 18, 2018)
Job-Skills Gap May Curb Growth: White House
economists (Council of Economic Advisors) note the
growing gap between the rising number of job openings
and the number of workers equipped to fill them could
limit the Country’s economic growth. The Trump
Administration is asking some large employers to sign a
‘pledge to the American worker’ to make significant
investments in training their current and future workers.
Trade and Tariff Threat Gets Closer to Consumers: After
imposing import levies on steel, aluminum and solar
panels, the Trump administration is threatening to assess
nearly $505 billion on tariffs in exports that China sends
to the U.S. that will affect U.S. customers. Out of the
more than 6,000 Chinese products on the latest U.S. tariff
list, the top 20 accounted for over $75 billion in U.S.
imports last year, or more than a third of the total import
value of all targeted items. Items include network gear,
wooden and metal furniture, circuit board equipment,
electrical panels, synthetic travel bags, electric lamps,
vacuums, vehicle wheels, electric converters, brake parts,
handbags, seafood, mattresses and more. About 40% of
U.S. imports shipped in containers moves through the
ports of Los Angeles and Long Beach. (WSJ, July 18,
2018 and BLS, July 13, 2018)
California Indicators
Ranking: California became the 5th largest economy in
the world in 2017, behind Germany and ahead of the
United Kingdom. Growth: Growth was 3% for 2017,
compared to 2.3% for the U.S. California’s GDP for
4Q2017: 3.4%. GDP by state growth for the 4Q2017
ranged from 5.2% in Texas to 1.3% in North Dakota.
Unemployment: Is 4% for June. Rate held at its record
low of 4.2% in May; U.S. unemployment rate dropped to
3.8% in May, matching April 2000 as the lowest reading
since 1969.
Environmental Regulations: Predictions were dire when
AB 32 (2006) meant cutting greenhouse gas emissions
25% by 2020. California's economy grew 26% since 2004,
when emissions peaked.
Attachment C
ECONOMIC NEWS & TRENDS July 18, 2018
3 www.avenuinsights.com
California Existing Single-Family Homes for May:
409,270 in May up 0.3% ; -4.6 from May 2017, with May
marking the first decline in homes sales in 4 months.
Median Price in May: $600,080 up 9.2% from 2017.
Peaks: Alameda, Marin, San Mateo, Santa Clara, San
Diego, and Orange counties all hit a new peak price at
$955,000, $1,392,500, $1,615,000, $1,454,500, $625,400,
and $824,450, respectively. (CAR)
E-Commerce, Retail Sales and Outlook
Total Retail Sales for 1Q2018: An increase of 2% from
4Q2017. Retail Outlook in 2018: Retail sales are on
track to match or exceed the healthy 4.2% gain they
made in 2017.
June Retail Sales: Up 0.5% from May and 6.6% above
June 2017. Total sales for April 2018 through June 2018
up 5.9% from the same period a year ago. Non-store
Retailers were up 10.2% from last year.
E-Commerce as a Percent of Total Sales: 1Q2018 (9.5%);
4Q2017 (9.1%); 3Q2017 (9.1%); 2Q2017 (8.9%); 1Q2017
(8.5%) California’s E-commerce sales comprise
approximately 13-14% of the total sales, based on
California’s portion of the national economy.
Amazon’s Prime Day 2018: Starts Monday July 16th at 3
PM ET and ends Wednesday, July 18 at 3: AM ET. Despite
some issues with site crashes, Amazon outpaced previous
sales volume for its ‘Prime Day’ summer sales specials
day. The retailer reported “millions” of sales of its smart
speaker Alexa.
Top 10 U.S. Companies / Ranked by E-Commerce Sales
Share, 2018: Amazon 49.1%; eBay 6.6%; Apple 3.9%;
Walmart 3.7%; The Home Depot 1.5%; Best Buy 1.3%;
QVC 1.2%; Macys 1.2%; Costco 1.2%; Wayfair 1.1%.
Total U.S. Retail ecommerce sales equals $252.69 billion
in 2018; top 10 companies’ sales share equals 70.1% of
total retail ecommerce in 2018. (EMarketer, July 2018)
Shipping and Handling
Firms are facing delayed supply deliveries because of a
truck driver shortage and slow rail service. Rising e-
commerce sales in 2017 drove up delivery costs a rise of
7% from 2016. UPS raised fees by 30% to $650 for the
largest items it delivers to discourage shippers from
putting oversize items into a network meant for smaller
parcels.
Gas and Auto Sales
Gas Prices: AAA shows (July 12, 2018) the national
average at $2.884 per gallon. California’s average is
$3.660. Increases from one year ago: California ($2.923).
Gasoline Stations were up 21.6% from June 2017.
California Car Sales: YTD Through March: California
Total (-3.8%); US Total (-1.0%); Light Truck Registration
for 1Q2018: In California increased 3.7%; passenger cars
-11.2%
Groceries, Food and Restaurants
Convenience Continues to Expand: Reached a high of
154,958, up 0.3% or 423 units in 2017, from the 2016
year-end total of 54,535 at the end of 2016. (NACS).
Restaurants: Industry’s share of the food dollar is 48%
Franchises: Growth in 2018, with output increasing by
around 6%, eclipsing 2017’s 5% rise.
Sports Betting/ States Can Legalize
Sports betting legalization moves forward following a U.S.
Supreme Court ruling. There is a pending state
constitutional amendment to capture some of the
estimated $20 billion to $40 billion a year in black market
gambling in California.
Attachment C
ECONOMIC NEWS & TRENDS July 18, 2018
4 www.avenuinsights.com
SECTION 1: U.S. ECONOMY
U.S. Economy and Indicators
https://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm (June 28, 2018)
https://www.bls.gov/news.release/cpi.htm (July 12, 2018)
GDP: Partly due to soft spending in the first quarter, GDP
growth slowed. In 2017 consumer spending was up 6%;
the year before 3%. Real GDP increased 2.2% in 1Q2018
(was 2.9% in 4Q2017; 3.2% in 3Q2017, 3.1% in 2Q2017,
1.4% in 1Q2017, and 2.1% in 4Q2016).
Consumer Inflation: U.S. CPI for June 2018: Increased
0.1% in Jun, after rising 0.2 in May. Consumer prices
rose in June at the highest level in more than six years
reflecting a positive economy.
Gasoline: From June 2017 to June 2018 (24.3%); June
2018 (.5%); May 2018 (1.7%); Apr (3%); Mar 2018 (-4.9);
Feb 2018 (-.9); Jan 2018 (5.7%)
New Vehicles: From June 2017 to June 2018 (-.5%); June
2018 (.4%); May 2018 (.3%); Apr (-.5%); Mar 2018 (.0);
Feb 2018 (-.5); Jan 2018 (-.1%)
Used Cars & Trucks: From June 2017 to June 2018 (-.7%);
June 2018 (.7%); May 2018 (-.9%); Apr (-1.6%); Mar
2018 (-.3); Feb 2018 (-.3); Jan 2018 (.4%)
Apparel: June 2018 (-.9%); May 2018 (0%); Apr (.3%);
Mar 2018 (-.6); Feb 2018 (1.5); Jan 2018 (1.7%)
Food At Home: From June 2017 to June 2018 (.4%);
Food Away At Home: From June 2017 to June 2018
(2.8%)
Full Services Meals and Snacks: From June 2017 to June
2018 (2.963%)
Wine: From June 2017 to June 2018: Wine At Home
(2.1%); Wine Away From Home: (1.9%).
Cable and Satellite TV Service: From June 2017 to June
2018 (1.495); June 2018 (.0); May 2018 (.0); Apr 2018 (-
.5)
Wireless Telephone Service From June 2017 to June 2018
(1.707); June 2018 (.0); May 2018 (.1); Apr 2018 (.0)
Lodging Away from Home: From June 2017 to June 2018
(1.707); June 2018 (.2); May 2018 (-.5); Apr 2018 (-.2)
Shelter: From June 2017 to June 2018 (3.4%)
Miscellaneous (June 2017 to June 2018): Eggs (14%);
Citrus Fruits (5.5%); Food at Elementary and Secondary
Schools (6.3%): Clocks and Lamps (-12.2); Dishes/
Flatware (-8.4%); Boy’s Apparel (10.2%); Video and
Audio Products (-13.6%); Toys (-10.2%); Gardening and
Lawn Services (7.6%); Cakes/ Cookies (2.3%)
Economic Influence and Forecasts
Interest Rates: The Federal Open Market
Committee raised the current rate to 2% in June 2018. It
expects to increase this interest rate to 2.4% in 2018,
2.9% in 2019, and 3.4% in 2020.
Unemployment: Rate will drop to 3.6% in 2018, and
3.5% in 2019 and 2020. That's lower than the Fed's 6.7%
target.
Jobs: Expects total employment to increase by 20.5
million jobs from 2010 to 2020. While 88% of all
occupations will experience growth, the fastest growth
will occur in healthcare, personal care and social
assistance, and construction. (BLS)
U.S. Manufacturing: Forecast to increase faster than the
general economy. Production will grow 2.8% in 2018.
Growth will slow to 2.6% in 2019 and 2% in 2020.
Attachment C
ECONOMIC NEWS & TRENDS July 18, 2018
5 www.avenuinsights.com
Services Sector for 1Q2018/ Contributions to Percentage Change in GDP from 1Q2017
www.census.gov/services/index.html (June 7, 2018);
https://bea.gov/newsreleases/international/trade/tradnewsrelease.htm (July 6, 2018)
1Q2018 Total Revenue: A decrease of 1.2% from 4Q2017
and up 5.2% from 1Q2017.
Personal Consumption Expenditures: Up 2.1% from
3Q2017.
Exports and Imports: Exports increased 8.8%; Imports
increased 8.6%, year-to-date from May.
Utilities: Increase of 9.1% from 4Q2017 and up 5.1%
from the 1Q2017.
Accommodations: Decrease 1% from 4Q2017 and down
2.2% from the 1Q2017.
Selected Services: Percent Change Year to Date 2018
From 2017: Dry Cleaning (11.1%); Auto Repair (7.7%);
Spectator Sports (-13.9%).
Other Services: Includes auto and electronic repair,
personal and laundry services, religious, grantmaking,
civic, professional and similar organizations: Decrease
14.3% from 4Q2017 and up 2.0% from 1Q2017.
E-Commerce 1Q2018
https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf (Next release is on August 17, 2018)
E-Commerce as a Percent of Total Sales: 1Q2018 (9.5%);
4Q2017 (9.1%); 3Q2017 (9.1%); 2Q2017 (8.9%); 1Q2017
(8.5%).
Percent From Prior Quarter: 1Q2018 (Total 0.2%; E-
Commerce 3.9%); 4Q2017 (Total 2.7%; E-Commerce
3.2%); 3Q2017 (Total 1.1%; E-Commerce 3.5%); 2Q2017
(Total 0.5%; E-Commerce 4.9%); 1Q2017 (Total 1.4%; E-
Commerce 4.4%).
Total Retail Sales for 1Q2018: An increase of 2.0% from
4Q2017.
Flipkart: Walmart is leading a group that will invest a
75% stake in this company; part of strategy to battle
Amazon.
Luxury: By 2025, online will represent 25% of luxury
goods.
Retail: 15% of retail sales take place online now. In 2013
it was 9%. Amazon nets 44% of those internet sales. 75%
of households with yearly income of $100,000 or more
have an Amazon Prime membership. (Kiplinger, June
2018)
SECTION 2: CALIFORNIA ECONOMY
https://www.sco.ca.gov/Files-EO/07-18summary.pdf
http://www.dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/index.html
https://www.bea.gov/newsreleases/regional/gdp_state/qgdpstate_newsrelease.htm
Economy: California became the 5th largest economy in
the world in 2017, just behind Germany and ahead of the
United Kingdom, with $2.75 trillion in gross domestic
product.
Growth: California’s growth was 3% for 2017, compared
to 2.3% for the U.S.
California’s GDP for 4Q2017: 3.4%.
Employment: Unemployment rate held at its record low
of 4.2% in May; U.S. unemployment rate dropped to
3.8% in May, matching April 2000 as the lowest
unemployment reading since 1969. The largest job gain
was in leisure and hospitality. Job losses occurred in
construction trade, transportation, and others.
California WARN Notices & Permanent Closures: Dec
2017: 36 notices / 14 closures; Jan 2018: 78 notices/
closures; Feb 2018: 45 notices/ 18 closures; Mar 2018:
41 notices/ 22 closures; Apr 2018: 65 notices/ 26
closures; May 2018: 71 notices/ 39 closures; June 2018:
52 notices/ 17 closures; July (as of 7.12): 13 notices/ 12
closures.
Attachment C
ECONOMIC NEWS & TRENDS July 18, 2018
6 www.avenuinsights.com
California Forecast (UOP, June 2018)
http://www.pacific.edu/Documents/school-business/BFC/Forecasts/CA-Metro-Forecast-JUNE-2018-V2.pdf
GDP: Over the next 12 months, real gross state product
is forecast to grow at a strong 3.4% pace before dropping
to 2.5% growth in 2020 as recession risks grow.
Unemployment: Forecast to average 4.2% for 2018 and
fall further below its record low to 3.7% in 2019 before
gradually increasing.
Tourism: Growing tourism and a gradual shift in
consumer spending from retail to restaurants has fueled
rapid growth in Leisure and Hospitality sector.
Construction: Construction activity continues to grow
with 40,000 to 50,000 new jobs anticipated in each of the
next three years. Construction wages have been among
the fastest growing of all sectors as employers compete
for a limited supply of skilled workers.
Housing: Single family housing starts surpassed 60,000 in
2017 and are projected to grow to 75,000 by 2020. Multi-
family production is projected to be near 50,000 units
this year, and near 60,000 units by 2021. With this
increase, housing production will finally be sufficient to
keep up with modest 0.7% projected annual population
growth, but will not be enough to provide relief to
California’s housing crisis.
Population: California’s population growth rate has
declined to 0.7% and is projected to remain at this level
through the 4- year forecast. California’s population will
reach 40 million by early 2019, and is adding less than
300,000 new residents per year, notably fewer than in
the past.
Cannabis
(www.pacific.edu)
In the first three months of legal recreational cannabis sales, California reported $34 million in revenue from the 15% excise
tax that applies to all legal cannabis sales, or $227 million in sales. Legal cannabis sales should grow as permitting
processes become permanent and more stable, and government agencies direct more resources to enforcement of illegal
cannabis sales and production. Predictions are that the California legal cannabis industry should exceed $5 billion in annual
sales and support 100,000 jobs over the next few years. The Central Coast region could displace the “Emerald Triangle”
region of Humboldt, Mendocino and Trinity area as the center of cannabis growing by taking advantage of a regulatory
decision by the California Department of Food and Agriculture to allow a single entity to hold an unlimited number of small
grower permits, effectively allowing cannabis farms of unlimited size if allowed by a local jurisdiction.
Tourism Assessment Program
https://tourism.ca.gov/
Local businesses may receive notices from the California Office of Tourism regarding a possible assessment. The Office is a
department within the Governor’s Office of Business and Economic Development that supports the promotion of California
as a global tourism destination and provides information services to visitors. Certain businesses may be subject to Tourist
Assessment Program, and a possible assessment. The California Tourism Marketing Act was enacted in 1995 to increase
California’s share of the national travel and tourism market. The legislation enabled the state’s tourism industry to assess
itself, authorizing the establishment of a nonprofit, public benefit corporation , Visit California, to oversee the promotion of
California as a premier travel destination. The statute became operative upon industrywide approval in 1997. The
assessment program was initiated in 1998 to be subsequently renewed every six years via industry vote. Additional
program information can be found within the California Code of Regulations (Chapter 7.65 Tourism Marketing Act).
Attachment C
ECONOMIC NEWS & TRENDS July 18, 2018
7 www.avenuinsights.com
SECTION 3: RETAIL TRENDS AND INFLUENCES
Retail Sales for June: Higher vehicle sales and gas prices
helped push sales up 0.5% in June, versus May’s revised
1.3% rise; Retail sales—a measure of spending at U.S.
stores, websites and restaurants—rose 0.5% in June from
the prior month. (Commerce)
Retail Outlook in 2018: Tax cuts, an improved economy
and an American consumer that is less cautious about
spending means retail sales are on track to match or
exceed the healthy 4.2% gain they made in 2017.
California’s Privacy Law: The National Retail Federation
is calling new state privacy legislation “deeply flawed.”
The law (effective in 2020) prohibits retailers from
treating customers who opt out of data sharing any
differently from those who do not, a provision that could
put an end to retail loyalty programs that offer discounts
to members.
Robots: Target plans to add automatic cash-counting
machines to its nearly 2,000 stores by this summer.
Amongst the lowest unemployment, rising wages and
shift to on-line shopping, retailers are automating more
store work.
Subscription: Hundreds of subscription businesses are
flooding the retail market with subscribers to pay a
monthly fee for a box of items chosen for them. 16% of
U.S. consumers have such a service, and more than half
are under 35.
The Netflix Model Work for Clothes: Stich Fix looks to
be among subscription model success.
Shop Crawls: Store owners and downtown planners are
organizing shop crawls, often with alcohol to spark
interest.
Selected Retail News Since May 2018
Brookstone: Debuted a new ‘Maker’s Showcase’ store in
Garden City, New York to highlight new technology and
innovations. The hands-on demo friendly stores feature
products from independent ‘makers’ and global tech
companies.
Claire’s: As part of its bankruptcy, Claire’s has identified
130 stores it plans to close. Most are in malls.
CVS: Adds home delivery; relies on Postal Service for
delivery. Amazon is buying PillPack and plans to ship
prescriptions throughout the country overnight.
Dick’s Sporting Goods: Sales are up despite predictions
by the National Rifle Association and others that the
store’s policies to cease assault rifle sales and other gun
sale restrictions would hurt its business.
Kroger: In the fall will debut a new apparel brand called
Dip developed by fashion designer Joe Mimran of Club
Monaco, Joe Fresh and Pink Tartan brands. While the
concept of apparel is unusual in traditional grocery
stores, it has long been common in European
hypermarkets as well as big box stores with grocery like
Costco, Walmart, and Target.
Fabletics: Kate Hudson's athleisure line plans to open 75
new stores across the U.S. and overseas, bringing its total
to 100.
Nike: Debuted a new concept store on Melrose in Los
Angeles called Nike Live. The intent is to fuse its brick and
mortar store with its digital marketing for an enhanced
loyal customer focus and experience.
Revolve: Los Angeles based online clothing retailer
preparing for IPO.
Starbucks: Raises prices per cup of coffee in June;
opened more than 2,000 cafes in the U.S. over the past
three years. Closing 150 stores in 2019 fiscal year.
Toys ‘R’ Us: Closed more than 700 stores in late June
after dropping plans to reorganize.
Walmart/ Education Tuition: Part of the effort to keep
staff in tight market.
Subway: After closing more than 800 U.S. stores in 2018,
expects to close hundreds more this year.
Sears: Has identified 100 unprofitable stores and will
begin closing sales for at least 72 of these stores.
Pret A Manger: KBA Holdings, the parent company of
Krispy Kreme, acquired Panera Bread last year and it
recently announced plans to purchase the popular British
sandwich shop Pret A Manger.
Attachment C
ECONOMIC NEWS & TRENDS July 18, 2018
8 www.avenuinsights.com
SECTION 4: AUTO SALES AND GASOLINE
California Car Sales / 1Q2018
https://www.cncda.org
2018 New Vehicle Projection: 2 million; 2017 was 2.05
million.
YTD Through March: California Total (-3.8%);
US Total (-1.0%)
Light Truck Registration for 1Q2018: In California
increased 3.7%; passenger cars -11.2%
Truck Market Share: California 53.7% / 63.3% in the US
Electric Vehicles: Grew 30% in 2017. Governor Brown in
late January signed an executive order to put five million
zero-emission vehicles on California’s roads by 2030.
Tesla is planning to build 500,000 cars a year in China.
Economic Impact of New Cars in 2017: Total Sales:
$123.06 billion; Percent of Total Statewide Sales Tax
Collected is 13%; Number of New Dealerships is 1,366.
Total Spent From Other Businesses is $2.74 billion.
Donations to Charitable Groups is $48.28 million.
Car-Rental Firms Try to Push Upstarts: Membership
growth for peer-to-peer car sharing has outstripped
revenue growth of rental firms. Accounts for about 3
million registrations.
SECTION 5: RESTAURANT AND FOOD INDUSTRY / ECONOMIC INDICATORS
Restaurants as Economic Engine: Industry’s share of the
food dollar is 48%.; Industry sales constitute 4% of the
U.S. GDP. For every dollar spent in restaurants, $2 is
generated in sales for other industries. (NAR)
Restaurant Franchises: Poised for growth in 2018, with
output increasing by around 6%, eclipsing 2017’s 5% rise.
Casual Dining Restaurant Rebound: Sales are
rebounding as sit-down restaurants upgrade decorum
and ingredients.
Local Ordinances/ Food Packaging: California has more
than 120 local food-packaging ordinances. A focus on
mandating compostable food packaging is popular, but
many cities do not have the infrastructure to properly
collect and compost the products.
SECTION 6: GROCERY INDUSTRY
Grocery Among Fastest-Growing Retail Segments: 674
stores are expected to open in 2018. Online grocery
spending is projected to grow to 20% of the market, or
$100 billion, by 2025.
Convenience Expands: 154,958, up 0.3% or 423 units in
2017, from the 2016 year-end total of 54,535 at the end
of 2016. (NACS).
Grocers Squeezed: Competition is coming from Aldo to
Amazon.com.
Suppliers: Tesco and Carrefour have struck a deal to
collaborate on how they buy from suppliers in an effort
to cut prices amid mounting competition from
Amazon.com. and other rivals.
What’s Working in the Supermarket: Companies with
strong frozen-food portfolios have outperformed rivals;
Customers are shying away from packaged, processed
foods and buying more fresh vegetables and meats;
Investing in private labels; Small challenger brands are
responsive (WSJ, June 8, 2018)
Kroger: Private-label sales are up 40% over six years, and
now account for almost 30% of unit sales.
Amazon: Discounts for Prime members are at Whole
Foods.
Attachment C