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August 2014
EXECUTIVE SUMMARY
Most recent data on taxable sales and other indicators point to
continued economic expansion in Florida for the rest of the year.
This issue features an analysis of the major Florida regions
performance by breaking down the components of the States
taxable sales. The regions examined in this analysis are Miami,
Orlando-Kissimmee, Tampa/St. Petersburg, Ft. Lauderdale, West
Palm Beach and Jacksonville. In 2013, the main contributor to
total Florida taxable sales was the Orlando-Kissimmee Region,
with 15.5 percent of total. The Region was also dominant in the
Tourism and Recreation category and in Total Investment, due to
its wide array of world-known theme parks, which require periodic
upgrading and expansion. The Miami Region was the leader in
Total Retail Taxable Sales, primarily due to a strong presence of
international visitors.
During the first quarter of 2014, West Palm Beach and Ft.
Lauderdale Regions exhibited higher rates of growth than the
other regions in all categories. Although their rates of growth
come from a smaller contributions base, their expansion shows
the growing vitality of these two areas and the increasingly
widespread nature of Floridas economic expansion.
The U.S. Gross Domestic Product (GDP) contraction of 2.1 percent
in the first quarter of the year likely dampened the rate of
consumer spending growth in Tampa, Miami and Jacksonville.
However, such a steep national decline failed to make a severe
dent in the States consumer spending, due to the strength of the
Floridas payroll employment growth and tourism. We believe that
a recovery in consumer spending growth is already on its way.

Florida Barometer of Key Consumer & Investment Spending Categories
(Florida Taxable Sales)

Trend
Florida Index of Consumer Spending, of which:
Retail Sales
Durable Sales
Tourism & Recreation



Total Investment, of which:

Business Investment in Plant and Equipment
Building Investment (Construction Related)


=Moderate Growth - = Strong Growth
Source: The Washington Economics Group Trend from EDR data.




Spotlight on Floridas Regions
With this issue, The Washington Economics Group, Inc. (WEG)
starts publishing an analysis of Floridas performance by regions,
based on taxable sales, as reported by the Florida Office of
Economics and Demographic Research (EDR). The year 2013 will
be used as a benchmark to illustrate the relative size of the main
Regions contributions to Floridas taxable sales and to analyze the
regions performance in the first half of 2014.
According to the EDR, the sales tax is levied on sales of goods,
but not services, although there are some taxable services. Major
categories of exempt sales are food not prepared for immediate
consumption, medical and legal services and residential utilities,
items purchased for resale, intangible personal property and
rentals over six months.
The EDR estimates that taxable sales comprise 40-45 percent of
retail sales. A service oriented economy, based on financial
activities and professional services would actually be larger than
what the total taxable sales and trends suggest. Although these
figures are not indicative of the size of the economy, particularly
because they leave out important segments of the service sector,
they still constitute a proxy that can be used to gauge economic
activity on a regular basis, and allow comparisons between the
regions.
MAIN CONTRIBUTORS OF TAXABLE SALES IN
FLORIDA
In 2013, the State of Florida collected about $337 billion in taxable
sales. The main contributor was consumer non-durable sales
representing 32 percent of total, followed by tourism and
recreation with $75 billion or 22 percent of total. Business
investment represents 17 percent, autos and accessories 16
percent, consumer durables 7 percent and construction
investment 6 percent. Therefore, investment (business and
construction) composes 23.
By regions, the main contributor to total Florida taxable sales is
Orlando-Kissimmee with 15.5 percent followed by Miami at 13
percent, Tampa 12 percent, Ft. Lauderdale 9.5 percent, West
Palm Beach 6.9 percent and Jacksonville 6.1 percent as presented
in Table 2 on the next page.


FLORIDA REGIONS TAXABLE SALES SHOW
STRENGTHENING ECONOMIC EXPANSION
Florida Regions Taxable Sales Show Strengthening Economic Expansion Page 2

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Table 2. Total Taxable Sales 2013

($ Million)
%
Out of Total
Florida, of which, $ 336,828

Orlando 52,346 15.5%
Miami 44,202 13.1%
Tampa 41,165 12.2%
Ft. Lauderdale 31,854 9.5%
West Palm Beach 23,351 6.9%
Jacksonville 20,476 6.1%
Source: EDR and WEG Calculations.


Among the regions, Orlando made a contribution of about $9.6
billion in Total Investment Taxable Sales last year, equivalent to
12.4 percent of total, followed closely by Tampa with $9.4 billion
or 12.2 percent and Miami with $9.2 billion representing 11.9
percent (Table 3). Tampa was ahead in 2013 in construction
investment taxable sales, with about $2.6 billion in taxable sales,
followed by Orlando with $2.2 billion and Miami with $1.6 billion.
Miami was ahead last year in plant and equipment investment
with about $7.6 billion, Orlando was second with $7.3 billion and
Tampa third with close to $7.0 billion.
Table 3. Total Investment-Related Taxable Sales 2013

($ Million)
%
Out of Total
Florida, of which, $ 77,064

Orlando 9,551 12.4%
Tampa 9,423 12.2%
Miami 9,202 11.9%
Ft. Lauderdale 7,273 9.4%
West Palm Beach 5,551 7.2%
Jacksonville 4,811 6.2%
Source: EDR and WEG Calculations.

Investment-Related Taxable Sales
Figure 2 that follows shows that the ratio of investment-
related taxable sales to Floridas total taxable sales averaged
24.4 percent between the years 2000 and 2013. It reached a
peak of 27.6 percent (housing bubble) in 2006 before falling
below average, as a result of the Great Recession that
ensued.

For the first time since 2009, the investment to total taxable
sales ratio showed a modest increase last year, growing
marginally from 22.5 percent to 22.9 percent, still below the
previous average. However, the start of 2014 shows the
recovery in construction investment-related sales a positive
development for the States economy.

Regional Retail Taxable Sales
The Miami Region contributed 13.5 percent of total taxable
retail sales in Florida last year, an amount close to $25 billion
as illustrated in Table 4 on the next page. Orlando was second
with $23.8 billion and Tampa in third with $23.7 billion. These
are areas with large populations and visitors that generate a
sizable amount of spending in consumer durables and non-
durables.

Figure 1.
Source: EDR and WEG.
Figure 2.
Source: Florida EDR and WEG. Orlando has a commanding lead in the important
category of tourism and recreation taxable sales. It is
important to note that Orlando, Miami and Tampa are the
largest regions in Florida in terms of population and economic
activity (Figure 1).

Florida Regions Taxable Sales Show Strengthening Economic Expansion Page 3

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Table 4. Total Retail Taxable Sales 2013

($ Million)
%
Out of Total
Florida, of which, $184,655

Miami 24,896 13.5%
Orlando 23,840 12.9%
Tampa 23,729 12.9%
Ft. Lauderdale 18,912 10.2%
West Palm Beach 12,955 7.0%
Jacksonville 11,646 6.3%
Source: EDR and WEG Calculations.

Regional Tourism and Recreation Taxable Sales
As Table 5 shows, the total Tourism and Recreation Taxable Sales
category is dominated by Orlando, which supplied close to $19
billion in taxable sales last year representing 25.2 percent of total
for the State. Miami is a distant second with 13.5 percent, and
Tampa is in third place with 10.7 percent. This category includes
hotels and motels, bar and restaurant sales, liquor stores, photo
and art stores, gift shops, admissions, sporting goods, rentals and
jewelry stores. It is in admissions ticket sales to a wide array of
theme parks that Orlando surpasses all other regions in Florida.
The world-known theme parks also produce a substantial volume
of souvenir and restaurant sales.

Table 5. Total Tourism and Recreation Taxable Sales 2013

($ Million)
%
Out of Total
Florida, of which, $75,109

Orlando 18,954 25.2%
Miami 10,104 13.5%
Tampa 8,013 10.7%
Ft. Lauderdale 5,668 7.5%
West Palm Beach 4,845 6.5%
Jacksonville 4,018 5.3%
Source: EDR and WEG Calculations.

REGIONAL ECONOMIC ACTIVITY IN 2014 BASED
ON TAXABLE SALES
Quarterly growth in the different categories of taxable sales
provides a measure of economic dynamism. We will use Floridas
taxable sales growth as a benchmark to determine which major
regions are expanding faster than the State and which are lagging
starting with the first quarter of 2014.
West Palm Beach, followed by Ft. Lauderdale, has been
leading the State in taxable sales growth in 2014. Both
regions make smaller total contributions than Orlando, Miami and
Tampa. Therefore, they have the capacity to expand at a rather
faster pace. However, their expansion is important for their
respective economies and the labor market. This also
indicates that the economic expansion of Florida is broad based
and not limited to the largest regions.
2014 Retail Activity Trends
The Index of Retail Activity aggregates spending on consumer
durables and non-durables plus tourism and recreation and is
analogous to consumer spending. Thus, it is a broad-based
indicator. Growth in the first quarter for the State of Florida was a
moderate 6.2 percent, compared to same quarter of the previous
year. West Palm Beach showed the faster rate of growth of all
major regions in consumer spending with an increase of 6.9
percent. Ft. Lauderdale continued expanding strongly, growing at
6.8 percent. Orlandos performance was strong at 6.2 percent.
Tampa, Miami and Jacksonville showed a more subdued
expansion, but still positive. (See Figure 3.)



The U.S. GDP contraction of 2.1 percent in the first quarter of the
year could have dampened somewhat the rate of consumer
spending growth in Tampa, Miami and Jacksonville. Even such a
steep national decline failed to make a severe dent in the States
consumer spending, due to the strength of Floridas payroll
employment expansion and visitors. Also, in January and February
(until Valentines Day) consumers usually retrenched, after the
expenditures made during the holiday season.
The Federal Reserve Bank latest Beige Book report stated:
Figure 3.
Source: Florida EDR and WEG.
Florida Regions Taxable Sales Show Strengthening Economic Expansion Page 4

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We believe that this uptrend will continue for the rest of the year,
supported by declining unemployment in Florida and growing
consumer confidence.
The Ft. Lauderdale Region exhibited faster growth than
Florida in all categories of consumer spending, while West
Palm Beach had an expansion consistently above that of the State
in all categories except Autos and Accessories. In this spending
category, West Palm Beach reached strong growth of 9.2 percent,
slightly below 9.8 percent for the State. Conversely, Miami was
below Floridas performance in all categories except Autos and
Accessories with very strong growth of 12.3 percent. Miami has
become a top U.S. center for autos and accessories sales, due in
great part to visitors from Latin America and exports in this
category to the Region. Miami and Orlando posted a contraction
of 1.7 percent and 2.6 percent respectively in Consumer Durables
Taxable Sales. Miami also posted a scant growth of 0.3 percent in
Consumer Non-durables.

2014 Investment-Related Taxable Sales
Trends

Total Investment Taxable Sales, comprising of construction and
business investment, rose by 7.3 percent in the first quarter of
2014. West Palm Beach was the leader with a strong 11.1 percent
growth. Miami was in second place with growth of 7.7 percent,
slightly above that of the State. Orlando with 6.5 percent, and
Jacksonville with 6.3 percent also exhibited strong growth. Ft.
Lauderdale and Tampa showed a more moderate expansion of 4.7
percent and 3.7 percent respectively. (Figure 4.)
2014 Building Investment Taxable Sales
Trends
Ft. Lauderdale and West Palm Beach were the leaders in the
Building Investment Taxable Sales category, with an increase of
11.1 percent and 10.7 percent respectively over the same quarter
of the previous year. Ft. Lauderdale has been showing strong and
steady growth in construction-related taxable sales since May
2012. West Palm Beach has also been growing steadily since
August 2011. Miami has maintained an excellent rate of growth
of 9.5 percent, very close to the 9.6 percent posted by all of
Florida. Our outlook for construction activity remains
positive for the rest of the year (Table 6).

Table 6. Building Investment Taxable Sales Trends - 2014

% Change from 1Q-2013
Ft. Lauderdale
West Palm Beach
11.1
10.7
Florida 9.6
Miami
Orlando
Jacksonville
Tampa
9.5
7.7
5.6
2.9
Source: EDR and WEG Calculations.


2014 Business Investment (Equipment)
Taxable Sales Trends
The frontrunners in this category were West Palm Beach with a
strong growth of 11.3 percent and Miami with 7.4 percent. Miami
is the main contributor to total taxable sales in this category and
continuous to grow strongly. Jacksonville grew as the State
average of 6.6 percent, closely following was Orlando with 6.2
percent. Tampa and Ft. Lauderdale showed a much more
moderate expansion of 4.0 percent and 3.1 percent respectively.
We also expect a steady expansion in this category, driven by
replacement and technology upgrades of equipment as the
economy continues to expand in the second half of the year (Table
7).
Table 7. Business Investment Taxable Sales Trends - 2014

% Change from 1Q-2013
West Palm Beach
Miami
11.3
7.4
Florida 6.6
Jacksonville
Orlando
Tampa
Ft. Lauderdale
6.6
6.2
4.0
3.1
Source: EDR and WEG Calculations.
Figure 4.
Source: Florida EDR and WEG.
that merchants in the Southeast of the nation
reported declining sales in the beginning of the year,
although a pick-up in activity was observed from mid-
February through March.
Florida Regions Taxable Sales Show Strengthening Economic Expansion Page 5

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This analysis intends to take the pulse of the Florida economy,
utilizing the state taxable sales compiled by the Florida Office
of Economic and Demographic Research and other useful
indicators from U.S. government agencies.
Retail Index
The index is constructed in order to smooth the volatility in the
taxable sales data and thereby to allow comparisons on a
monthly basis. The index is constructed by aggregating the
categories of autos and accessories, other durables, tourism
and recreation and consumer nondurables. This grouping
represents the bulk of non-investment spending and is
analogous to personal consumption. The sum of these four
categories is seasonally adjusted and a four-month moving
average is taken.
Tourism and Recreation
The category of "tourism and recreation" taxable sales includes
hotels and motels, bar and restaurant sales, liquor stores,
photo and art stores, gift shops, admissions, sporting goods,
rentals and jewelry stores.


Building Investment
The category of "building investment" taxable sales includes
sales by building contractors, heating and air conditioning
contractors, insulation, well drilling, electrical contractors,
interior decorating, paint and wallpaper shops, cabinet and
woodworking shops, soil, lumber and building suppliers and
roofing contractors. Services provided by these businesses are
not generally taxable.
Business Investment
The category of "business investment" taxable sales includes
farm equipment, feed and seed suppliers, store and office
equipment, computer shops, machine shops, industrial
machinery, hotel and restaurant suppliers, transportation
equipment, manufacturing and refining equipment, industrial
suppliers, paper and packaging materials, medical and optical
supplies, commercial rentals and wholesale dealers.
Transactions reported as subject to the "use" tax are also
included here, regardless of the kind code of the business
reporting the "use" tax.

Notes