Rising cases and uncertainty surrounding the more contagious COVID-19 variant are likely to blunt what had been expected to be strong back-to-school and end-of-tourism season sales, economic experts said.
The state’s businesses have been buzzing along since pandemic restrictions were lifted and pent-up demand for travel and leisure boosted sales this summer. Maine tax revenue for retail, automobiles, restaurants and lodging rose to $3.22 billion in June, up from $2.59 billion the previous June, according to state data. That is higher than the pre-pandemic sales taxes.
Back-to-school sales still are expected to be brisk compared with last year. Nationwide, Deloitte Insights expects a 16 percent rise to $32.5 billion in back-to-school purchases this year compared to last year. Back-to-college spending in the U.S. is expected to reach a record $71 billion, up from $67.7 billion in 2020, according to the National Retail Federation.
However, ongoing worker and supply shortages are expected to depress sales in Maine, although the state’s high vaccination rate, coupled with the prospect of booster shots, could lessen the effect.
The BDN asked several Maine economy experts to share their outlook for the fall. Their responses have been edited for clarity and brevity.
What impact do you expect rising COVID-19 variant cases to have on this year’s return-to-school sales and post-peak tourism sales?
Stefan Iris, senior vice president, Camden National Wealth Management: The impact will be a net negative. Supply chain shortages and bottlenecks were already likely to contribute to softening back-to-school sales, and uncertainty regarding new restrictions will not help. Post-peak tourism will likely experience a similar effect. One caveat is that Maine has relatively strong vaccination numbers and accelerating prospects of a booster may dampen this effect.
Bob Montgomery-Rice, president, Bangor Savings Bank: We had been very optimistic going into the fall. Unfortunately, as we watch the persistent rise and spread of the delta variant, we are growing more concerned. Tourism has seen a strong summer — maybe not as strong as it could have been given the labor shortages across industries. We had been hopeful that come late summer and fall, the labor market might loosen as people become increasingly ready to return to work. However, these labor shortages continue to be a big concern and could create a drag on the economy.
Sheena Bunnell, professor of business economics, University of Maine at Farmington: COVID-19 variant cases have caused a temporary dampening effect on the sales of consumer goods and services in general. However, return-to-school sales will remain relatively strong, as school children are ready to go back to in-classroom learning. They are also key drivers and influencers of their parents. Post-peak tourism sales will continue to do well, with some short-term ups and downs.
How do those projections differ from last year?
Iris: While the pace of growth and sales will likely slow compared to recent months, the year-over-year projections are positive. The overall takeaway is that we’re expecting continued growth, albeit at a slowing rate.
Montgomery-Rice: If the delta variant stays at this level and pace, it has the potential to create more uncertainty and hesitancy in consumers, which can dampen the economy.
Bunnell: Last year there was a lot of uncertainty regarding the pandemic, vaccinations, unanticipated lockdown of the economy, loss in jobs and remote learning. This year is different as the economy has been robust with the fiscal stimulus. Consumers have slowly learned to adapt their expectations and their behavior to cope with the pandemic. They are more comfortable going out to eat at restaurants, traveling more and engaging in leisure activities.
What will be the highlights and the weak points for Maine’s economy going into the last three months of the year?
Iris: We expect strong continued growth in most economic sectors, as the return to school and college classrooms, road and bridge reconstruction, durable goods manufacturing, professional and technical services and other service sector activities continue to ramp up in key parts of the state. We also expect that recent wage gains will translate into additional consumer spending in the coming months.
Montgomery-Rice: The good news is that we can do something about this. If we see higher rates of vaccination and continue our safety measures to limit the spread of COVID, we’ll see positive COVID rates stabilize and hopefully decrease. In turn, this will help stabilize the economy.
Bunnell: Maine’s economy will continue to grow. Household savings rates are relatively high and consumers will allocate some of their savings towards consumption of goods and services. Continued low interest rates will favor consumers and businesses. The weak points are the rising median home values in Maine, housing shortage and lack of workers in the service sector, especially in hospitality and health care. Another weak spot is higher inflation for the fourth quarter.
What federal or state policies or programs could change the course of business and the economy in Maine through the end of the year?
Iris: Families are due to receive increased federal child care assistance. We expect that these additional funds combined with a general trend back to in-person schooling will generate economic activity.
Montgomery-Rice: There is a potential for funds from stimulus and infrastructure to have a positive impact both on the day-to-day spending and sense of security for families, as well as on the economy as a whole in the coming quarters.