AMERICAN DEMOGRAPHICS 2014

SOUTH: THE REALITY OF Recovery

ECONOMIC OVERVIEW

While the South is gaining jobs at a similar rate to the other U.S. regions, it is, at the same time, experiencing the nation’s highest rate of inflation. As such, consumer confidence is mixed here—exceedingly high in some areas and notably low in others. “The East South Central region of the South was really hit hard by the recession in terms of its base of manufacturing and service sectors—this is likely to be an area that lags in recovery,” says Ken Goldstein, an economist with The Conference Board, an independent business membership and research association.

JOBLESS RATE

With a jobless rate of 6%, as reported in June 2014 according to the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), Dixie is tied with the Midwest for the lowest unemployment rate. This number reflects a steady and impressive decline for the South—it was reported at 7.2% in May 2013 and 7.8% in May 2012.

CONSUMER CONFIDENCE

Even though its jobless rate is moving in a healthy direction, certain regions of the South remain reserved with confidence for recovery. Hit harder by the recession, the East South Central region—including Kentucky, Tennessee, Mississippi, and Alabama—had the lowest Consumer Confidence Index (CCI) in the South.

This number was reported as 72.1% in May 2014, according to The Conference Board. This is notably lower than the 83 CCI reported for the overall United States in the same time period.

The confidence outlook was much rosier in the South’s less-beleaguered West South Central region—including Texas, Oklahoma, Arkansas, and Louisiana—where the CCI was 128.5 in May 2014. In the South Atlantic, which includes a mix of both harder-hit and economically healthier states such as Florida and Maryland, the CCI rang in at a conservative 81.8.

COST OF GOODS

The South saw a significant 2.3% increase in the Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) from June 2013 to June 2014, which ushers in a concern about inflation. Dixie’s increase on this front was notably greater than the overall national CPI, which bumped up only by 0.3% for the same period, according to the BLS.

RETAIL REAL ESTATE

While progress is being made here in the commercial real estate market, it is coming at a snail’s pace. “When the economy bounces back more we will finally see growth here in the South,” says Ryan Severino, a senior economist with Reis, Inc., a leading provider of commercial real estate information and forecasting. “In the meantime, the Florida markets in general have bounced back more than people thought they would—Miami, Fort Lauderdale, and Palm Beach have all had a healthy influx of Latin American money that is helping a lot.”

VACANCY RATES

In the South Atlantic, the vacancy rate rang in at 10.4% in the first quarter of 2014, according to Reis, Inc. This was only a very slight decline over the first quarter of 2013, when the vacancy rate here was 10.9%.

While rates are going in the right direction, the recovery on this front is very slow—the vacancy rate in the first quarter of 2012 was 11.1%.

RENTS

Asking rents in the South Atlantic also continue to move in a positive direction, albeit also at a slow pace. In the first quarter of 2014, asking rents were $18.38 PSF, which was up slightly from the $18.15 reported in the first quarter of 2013. Still, these numbers are relatively healthy compared with the asking rent reported for the overall U.S., which was $19.42 in the first quarter of 2014, according to Reis, Inc.

METRO MARKETS

The charming South, which is host to a wealth of eclectic urban areas, had some strong success stories, particularly in Virginia, Florida, and Kentucky.

CITIES TO WATCH

Metropolitan areas that rose to the top in the commercial real estate arena with low vacancy rates in the first quarter of 2014 in this region include suburban Virginia (5.9%), Miami (7.1%), Nashville (7.9%), Lexington, KY (8.5%), Louisville (9.6%), and Fort Lauderdale (10.2%), according to Reis, Inc.

These urban areas also fared well on the jobless front, which made their economies stronger. According to the BLS, these areas had the following lower unemployment rates in June 2014—Richmond, VA (5.3%), Fort Lauderdale (5.3%), Lexington, KY (6.1%), Louisville (6.4%), Miami (7.2%), and Nashville (6.2%).

THE SUNNY SOUTH

The South takes the lead in second-pair sunglass sales for the first time. The category has grown from
69% in 2010
to
74% this year

Saint Laurent sunglass image courtesy of Safilo

FASHION TRENDS

The ladylike and genteel South adopts fashion trends, but on its own terms. For instance, fashion devotees in Dixie will likely jump on the fall season’s highly feminine Great Gatsby-inspired Café trend, but with their own regional interpretations of fabrics and colors.

“Particularly for the South, the clothing in this trend will have to be in a colorful print, silks, and chiffons, and more dressy dresses,” says Roseanne Morrison, fashion director at The Doneger Group, the fashion industry’s leading trend forecasting service.

In Focus

LENS MARKET

FREE-FORM: It’s been a steady climb here regarding sales of free-form lenses and digital designs. Except for a slight dip in 2010, the South’s numbers have been on an upward path. This year’s 35% of all lens sales represents a double-digit (10%) jump in just two years.

PALs: While the percentage of Southern presbyopes opting for PALs hasn’t changed much over the past few years, 2014’s survey noted a one point decrease in PAL popularity. PAL sales (vs. multifocal lenses) here were the lowest of the regions this year, at 70%. Conversely, bifocal and multifocal lens sales jumped 3 percentage points after staying steady at 25% the past two years.

MATERIALS AND EXTRAS: Polycarbonate reigns supreme in the South, with the highest percentage of ECPs who note it as their most-sold material. This is a big jump from last year, when it was the favorite of only 45% of ECPs. Use of Trivex decreased here, with 8% of ECPs considering it their most-sold material. But the South loves AR, as it leads the regions this year with 87% of ECPs saying it’s their most-sold extra (a 14% jump over last year). Photochromics lost ground as a favorite “extra,” and seems to have hit a stumbling block in the South this year, losing 15%. Polarized, however, saw a slight uptick in interest, gaining 2%.

FRAME MATERIALS: THE STATISTICAL STATUS OF SOUTHERN FRAME SALES…

ON THE EDGE: SOUTHERN REGION

DO I EDGE IN-HOUSE?

# OF JOBS EDGED IN-HOUSE (COMPARED TO LAST YEAR)

+ MORE: 21%

- LESS: 12%

= SAME: 25%

INTENT TO START IN-HOUSE LAB SERVICES WITHIN 3 YEARS

EDGING
29%

SURFACING/CASTING
13%