June 19, 2024

City sales tax revenue is ahead of last year, but there are signs consumers might be pulling back on spending.

Revenue collected in May, which generally represents sales in April, was up 2.4 percent on a year-over-year basis, contributing to an overall 3 percent annual growth.

That’s “consistent with where we ended the year last year,” director of finance Shawn Pritchett said in a report Tuesday to the Sioux Falls City Council. “Still hopeful as we get into those later summer months and into the fall that we’ll see some stronger numbers coming in. It’s just been kind of all over the board.”

Entertainment tax revenue is up 5.3 percent for year, “still remaining strong,” Pritchett said. “May was actually a weak month that came in only 0.4 percent over May of last year. … Restaurants were still up, lodging is still up … but there was a $4 million drop in a nonspecified category.”

Looking at revenue by sector, there are drops in key categories such as general merchandise and department stores, and wholesale trade.

“As you talk to businesses around town, there is some softness out there,” Pritchett said, adding that consumers who have shown resiliency are winding down some of their post-COVID spending.

“They’re starting to pull back a little bit on discretionary income,” he said.

Lodging tax revenue is up 4.2 percent, rebounding from an unusual drop earlier this year.

“It’s a little bit closer to what we’ve seen trending,” Pritchett said. “We have seen a little bit softer occupancy in the numbers overall this year versus last year.”

Inflation is still “sticky and stagnant and stubborn” at 3.3 percent in May, he added.

“Food-cost inflation decreased to 2.1 percent, which is positive given how much that has impacted families here.”