November 3, 2013

Revival of the fittest: Maine’s economy shows strength

Key sectors are showing signs of life. Could an overall turnaround be close behind?

By Jessica Hall
Staff Writer

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Statewide, home construction permits for the state peaked in May at 330 single-family homes and slipped in subsequent months, according to the U.S. Census Bureau. The number of permits from April through August exceeded the year-ago periods in every month except July.

By contrast, sales of existing single-family homes in Maine rose 24.59 percent in September, more than double the increase nationally. Those gains came on top of jumps of 20 percent in August and 31 percent in July, year over year.

In addition to big purchases like cars and homes, a variety of other factors, from job growth and interest rates to business investment, need to be taken into account to get a thorough understanding of the state’s overall economic health, economists said.

Maine’s unemployment rate in August was 7 percent, up from 6.9 percent in July but down from the year-ago rate of 7.3 percent. The state Department of Labor estimated that 50,000 Mainers were unemployed in August, 1,700 fewer than a year ago.

“Things are better than they were, certainly, but a lot of what we want to see is just consistent growth without some of the starts and stops,” Rector said. “The federal debates create uncertainty for businesses and households, and that drags on how consumer(s) and businesses spend and hire.”

The crucial test of consumer confidence will be September and October retail sales figures, which will indicate whether the 16-day partial U.S. government shutdown, which began Oct. 1, slowed down spending, McConnon said.

“We’re cautious until we see September and October numbers. We need to see whether the government shutdown jiggled consumer confidence,” said Curtis Picard, executive director of the Retail Association of Maine. “It remains to be seen what will happen because the situation has not been permanently resolved.”

Budget battles could become a factor again in a few months, since Congress reached an agreement only to keep the government running until Jan. 15 and allow additional borrowing until Feb. 7.

“Psychologically, it (the shutdown) added to people’s concerns about the future,” Collins said. “However, I don’t think it had a significant impact on our sales. We didn’t see a direct effect on our business. But it makes people uneasy.”

Adam Lee, chairman of Lee Auto Malls, which has dealerships throughout Maine, agreed that the government shutdown made people anxious about big purchases.

“My gut feeling is that even non-government employees who might have been thinking about buying a car may have waited to buy because they were rattled. Everyone got a little shook up,” Lee said. “We’re still having a really good October and caught up, but the days of the shutdown were quiet days.”

For Maine, a tourist destination, restaurant and lodging sales are key measures of economic health. Tourism is a nearly $5 billion business in the state, with the summer months generating half of that spending, according to 2012 figures from the Maine Office of Tourism.

“August is a huge month. Lodging rates continued to increase and the higher rates were being absorbed by the market,” said Greg Dugal, executive director of the Maine Innkeepers Association.

In Portland, for example, the average daily room rate in August rose to $146.13, up from $136.22 a year ago, according to Smith Travel Research.

“A rising tide lifts all boats – when lodging sales are up, restaurant sales tend to rise. Meals and lodging are discretionary items, and when that money gets spent, that speaks well of consumer confidence,” Dugal said.

Dugal cautioned, however, that tourism sales figures could take a hit in September and October because of the federal shutdown. Some vacationers canceled trips to Maine after Acadia National Park closed as part of the government shutdown, he said.

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