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Retailers see high gas prices cut into profits More than half of Michigan retailers indicate
that record-high gasoline prices will cut into their profits by raising
costs or lowering sales, according to the monthly Michigan Retail Index
survey conducted by the Michigan Retailers Association (MRA) and Federal
Reserve Bank of Chicago. When asked to choose the primary effect of
spiraling gas prices, 26 percent said higher costs and 25 percent said
lower sales. Only 10 percent said higher retail prices, and a far-smaller
5 percent expected the result would be a boost in sales. Gas prices above the $2 mark, together with
extremely wet weather, may be the reason more Michigan retailers saw sales
fall off in May after the best four months since 2000. The Index found that 35 percent of retailers
increased sales in May over the same month last year, while 16 percent
reported as-good sales and 49 percent recorded declines. The results create
a seasonally adjusted performance index of 39.2, down from 56.7 in April
and the lowest month since March 2003. “In April we said the big question is
whether gas prices above $2 a gallon will cut into retail sales this summer.
May’s figures might have given us the answer,” said Larry Meyer,
MRA chairman and CEO. “Add record rainfall to that equation and the
answer is reduced sales.” Retailers’ projections for the next
three months fell slightly in May. Sixty-three percent forecast better
sales for June–August over the same period last year, while 12 percent
project as-good sales and 25 percent expect declines. The results create
a seasonally adjusted outlook index of 69.2, down from 72.3 in April and
virtually the same as May 2003. Sales tax revenue totaled $470 million in
May, which was down 2.6 percent from the year-ago level. Sales tax collections
from motor vehicle transactions fell 23 percent in May, while sales tax
collections from all other taxable retail sales were up 2.7 percent. July marks the 10th anniversary of the Michigan Retail Index. Established in July 1994, the Index remains the only statewide survey of its kind. Complete results of this month’s Michigan Retail Index—including data on sales, inventory, prices, promotions and hiring—are available at www.retailers.com/news/retailindex.html. The website includes figures dating back to July 1994.
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