The Golden State showed stronger than expected gains in sales tax receipts in the first quarter of 2022, reporting an overall 17.1% spike in local one-cent sales and use tax from January to March when compared to the same quarter last year.
“Even with instability in the stock market, the crisis in Ukraine driving up global prices for crude oil and the U.S. Federal Reserve Board beginning to tackle inflation with rate increases, consumer spending continued at a steady pace in the first quarter of the year,” stated HdL Companies President/CEO Andy Nickerson. HdL is the leading provider of revenue enhancement technology and consulting services for local governments. Each quarter, it reports on California’s sales tax receipts and impacts on local jurisdictions.
“Significant growth in both fuel and service stations, and the restaurant and hotel sector drove dramatic gains to local agencies across the state,” noted Nickerson.
Fear of supply shortages following the invasion of Ukraine in February immediately caused a spike in the global price of crude oil. A dramatic jump to California consumer gas and diesel prices followed, just as many in the workforce were commuting back into offices. Fuel and service station receipts showed a robust increase of 47% over last year.
Restaurant and hotel receipts continued to climb for the 4th quarter in a row, increasing by almost 40%. Meanwhile higher menu prices and continued steady demand to dine out also propelled the gains as well as increased attendance to theme parks and entertainment venues.
Strong sales of new and used vehicles caused the autos and transportation sector to jump 15% for the period. Increased sales of automotive brands committed to full electric or hybrid models also helped this sector, given the sudden rise in fuel prices.
Post-holiday retail sales of general consumer goods remained solid, improving 10%. Prior supply chain concerns dissipated, port operations began returning to normal and headwinds from inflation and higher cost of goods had not yet slowed consumer demand. Discount department stores, especially those selling gas, drove these stellar returns. Use taxes generated from online sales and purchases from out-of-sate vendors allocated via the county pools, heartily surpassed expectations, gaining 13% over the comparison period.
The first quarter sales period contributed to an already strong 2021-22 fiscal year for most municipalities statewide. “Continued inflationary pressure, soaring interest rates and record gas prices may soften growth going into 2022-23,” concluded Nickerson.