If Utah had a VIX index for its taxable sales, it would be at an all-time record high. Of the 38 taxable sales economic sectors, 14 had higher than positive 10% in March year-over-year sales. Another 14 sectors showed below negative 10% in March. This is all-time record volatility since the State began tallying taxable sales in 1980.
There is a saying in stock investing, “You can’t fight the Fed”. That appears to be good advice during this current pandemic-induced recession for Utah. June receipts for local 1% sales taxes were expected to be down between -12% and -26%. Yet, actual tax receipts were up 7.3%. These represented April taxable sales, which were expected to be in negative territory with shutdowns and stay at home mandates in effect for the full month.
May local tax receipts, representing March sales were also expected to be in major decline, but they were up almost 8%. We think this is because the Federal government sent out personal checks of up to $1,200 and expanded unemployment claims checks up to $4,000 per month to those laid off. In addition, the federal government sent massive checks to the states governments and small businesses.
The second thing that bolstered taxable sales in March was the continued boom in home building along the Wasatch Front. New residential construction permit values were up 51% in Salt Lake County from January through April according to the Kem Gardner Policy Institute. The “Fed” or Federal Reserve Bank bolstered construction too, easing home building lending by buying bonds and keeping interest rates at their lowest levels in decades.
Along with the Fed, modern technology of Internet retailing has enabled consumer purchasing of nondurable goods without stepping out of their homes during the pandemic. Non-store retail (Internet and catalogue) sales were up 181% in March, while retail clothing and the sporting goods, hobby, music, book store sector sales were off -49% and -11%, respectively.
What economists call “substitution effects” were also evident from increased buying at grocery stores, up $160 million in March, while consumers cut restaurant purchases by $122 million. Grocery store sales were up 42%, while restaurant sales were down 29%.
“You can’t fight the Fed” was a true maxim for March and April consumer spending in Utah. Federal government checks to small businesses and the unemployed combined with the Federal Reserve’s easing of the money supply and low interest rate policies to keep the Utah economy surging along. Maybe the Utah Legislature should have waited for this data before making budget adjustments. The chart below illustrates the ups and downs of March 2020 sales for large taxpayers who pay the Tax Commission on a monthly basis.