by Dr. Patrick Jones
Last year will go down in the record books as the best on record for the local economy. At least as measured by taxable retail sales. Data just released from Washington’s Department of Revenue put total sales in the two counties in 2024 at about $4.475 billion. That sum represents a year-over-year change of 3.5%.
This growth rate, however, was low historically. Over the past decade, the compounded annual growth rate of taxable retail sales in the two counties has been 7%, or twice as high. If we consider the years between 2024 and 2020, 8%. Last year was simply not a robust year.
Yet as indicator 2.2.3 reveals, last year the local economy outperformed the state economy, with a 3.5% growth rate vs. 1.2% statewide. This signals a reversal from the prior two years, when growth of this measure of the local economy underperformed the state. In the longer view – over the past decade, however, taxable retail sales here have advanced more slightly quickly than in the entire state: 7% vs. 6%.
In nearly all Trends indicators, a county breakdown is available. By clicking on the geography radio buttons in the graph, one can easily see that Douglas County fared much better in 2024 than its counterpart across the Columbia. Douglas County was reported a 6.5% year-over-year increase, while Chelan County sported a 2% bump.
Why do we care about taxable retail sales? For one, it’s a good measure of the consumer economy, as most goods and many consumer-facing services are subject to the tax in Washington state. The obvious exception among goods are groceries and prescription drugs. Of course, many services aimed at consumers are (still) not taxed in the state, such as those from medical providers, power utilities, and insurance. Muddying the waters of retail spending a bit further, the tax also embraces most construction activities.
Nonetheless, taxable retail sales is as close a measure as we will find in the state to track “consumption.”
While this particular considers annual measures, the Trends also offers a similar measure in indicator 2.2.4, but quarterly. This has the advantage of providing insight into the state of retail sales within approximately six months and not a year.
Another reason communities care about this tax is its position as the cornerstone of most revenue mixes of local governments’ general funds. As taxable retail sales go, often so goes fiscal health of local governments.
What about the outlook for this integral part of the local economy in the next 2-3 years? The Trends doesn’t offer forecasts. We’ll note, however, that local year-over-year changes in taxable retail sales have moved in lock step with those of Washington state over the past decade. At 0.99, the correlation is close to perfect.
Readers likely know that Washington state economists are forecasting relatively slow revenue growth over the next 2-3 years. While taxable retail sales are only one source of revenue to the state, they make up the largest source and their outlook greatly influences the revenue outlook for the general fund.
It seems unlikely, therefore, that the near-term outlook for the consumer economy here will be materially different than that of the state.