Wednesday, April 23, 2014
By PAUL KOENIG Kennebec Journal
Consumer retail sales in Maine and the Augusta area have continued to increase in the last three years, giving hope to business leaders that perceptions about the economy have also improved.
"Economic growth is not robust by any means," said David Findlay, a professor of economics at Colby College in Waterville. "But the trend right now is clearly positive, and as long as that's sustained, that's a good thing for the Maine economy."
The state's economy has remained mostly stagnant over the last two years, but consumer retail sales continue to slowly climb from a low point in 2009.
Total consumer sales in the Augusta area grew 2.88 percent from 2011 to 2012, compared to 2.95 percent in the state.
The largest contributor to consumer spending growth in the Augusta area has been automobile sales, which represent almost a third of the area's overall taxable consumer sales.
Trends in automobile and building supply sales indicate whether consumers are willing to invest in long-term purchases, according to Charles Colgan, professor of public policy and management at the University of Southern Maine's Muskie School of Public Service.
Findlay also said that vehicle purchases can show how individuals perceive the economy.
A big ticket item is something that households would be hesitant to purchase if they're uncertain about their own economic situation, he said.
Automobile sales in Maine have grown since 2009, but building supplies haven't recovered as well.
"That's primarily because autos wear out," Colgan said. "Homes, we really don't move when they wear out. We fix them up."
Sales of building supplies remained mostly flat through 2012 and dropped in the first quarter of this year.
Colgan said growth in that category comes only from building new structures and Maine hasn't had a major increase in new building activities.
He said overall consumer sales growth is likely more a result of the growing prices of goods than more goods being sold -- an indication of the relatively flat Maine economy.
Peter Thompson, president and CEO of the Augusta-based Kennebec Valley Chamber of Commerce, said he sees the increase in retail sales for the Augusta area and state as proof that the economy and people's perceptions about it are improving.
"I think it's a valuable indicator for where we've been and at least where we're headed," he said. "And I like the look of everything, besides building supplies."
Besides the positive trend in auto sales, Thompson pointed to the construction of MaineGeneral's regional hospital in north Augusta as another sign of an economy on the rise.
The hospital is scheduled to open in November.
Charlie Shuman, owner and president of Charlie's Motor Mall in Augusta, has benefited from the auto industry growth firsthand.
"Things for us are very good. Very, very good," Shuman said. "And we're optimistic that this year will finish out strong."
He said sales at his dealerships have been growing around 8 percent to 10 percent annually in recent years.
Fuel-efficient cars are driving a lot of the growth, as well as crossover utility vehicles, Shuman said.
He also said he's seen more customers trading in vehicles after one or two years because they want the excitement of a brand-new model.
"I think the customers are much more positive when they come in here," Shuman said. "There's more joy in buying a car, like it used to be. It's not all just necessity now."
Tom Brown, president of the Maine Automobile Dealers Association, said dealerships are reporting increases in sales.
"Business has been better over the last couple of years for a few reasons," Brown said. "One, there was obviously a lull in the recession, and people held onto their vehicles longer; so the pent-up demand factor has helped sales in the last couple of years."
More vehicle turnover is also a result of auto manufacturers redesigning and re-engineering some of their vehicles, Brown said, including new electronics that customers want and improving fuel efficiency.
He also said financial institutions have been more willing to give favorable auto loans.
Findlay said a more important factor in growing the local economy, besides just more sales, is what businesses do with the increased revenue.
"If the increase in spending doesn't result in increased hiring by a firm, then the local economy won't be as great," he said.
Hiring new employees will have a multiplier effect -- new employees will have more income to spend at other businesses and so on, he said.
"What will be important is the response by local establishments," Findlay said.
Paul Koenig can be contacted at 621-5663 or at: