There’s been a lot of talk about the economy lately and yet so few examples of proper analysis. In order to get a better idea, let’s take a look at some charts.
Here’s a picture of Retail spending as of August 2010 (we’ve emphasized 2010 for added illustration). What you’ll note is that we’ve used the past few years worth of available data to approximate the trend for the remaining months of the year. By rough eye we can note we’re close to 2005 spending levels, but haven’t dropped to 2004 levels*.
*Note, data from prior to Feb 2007 is approximated based upon % change numbers due to Feb 2007 change methodology that impacted the sample size and resultant statistics.
Now that we appreciate the approximate retail sales levels and a reasonable approximation the remaining months of 2010, let’s use the annual summation of these numbers so we can compare them to duty collected each year. Note that we’ve identified government’s and our estimates in different colours and that the axis minimums have been adjusted to provide a more comparable visualization.
There are a few things we can note in this chart. Notice how spending levels still rose from 2007 to 2008 and yet duty collected by government declined. We can estimate that this is due to retailers having to pay duty up front and that duty to shelf time prior to sale that we would likely see a 6-12 month lag of spending behind duty levels. This would explain why duty levels dropped in 2008 while spending was at it’s highest. We could also presume that the flat level between 2008 and 2009 is due to a glut of inventory where retailers bought less in 2008 but continued to sell it in 2009. Subsequently we can look at Government’s duty estimate. Barring changes in duty rates that are unknown to this author we can note that government has been overly optimistic regarding the 2010 duty rates, predicting a return to duty rates comparable to 2006 spending levels. What we can note however is that we’re on track to match 2005 spending levels and if there indeed is a lag in duty rates than the ongoing decline in spending may compound the impact on duties received.
Let’s take a moment to approximate duty levels based upon prior spending levels and our approximate number for 2010, which for the last few years we’ve averaged just under 20% of spending levels.
Interesting, with this projection we can expect to only bring in $221 million in duty receipts, about $10 million less than the $232 million government projected in the 2010/11 budget. Depending on whether duty receipts are a leading indicator for spending then we could well see even more of a decline.