Spending

Looming recession does not affect tourism, spending in Wilmington area

It’s a Thursday at the end of July and we’re talking about a recession. But you would never know that by looking around Southport town centre.

The streets are lined with cars and people stroll through the city, stopping at shops, buying ice cream and hoping to catch a glimpse of the filming taking place in the city.

At Cattail Cottage, Pamela Sexton is busy moving a display rack, taking orders over the phone and greeting customers. Although there was a bit of a slump after the July 4 holiday, business picked up.

But Sexton knows that hard times are coming; she saw him.

Economists and business owners say the recent boom in tourism and discretionary spending related to the pandemic makes it difficult to gauge the impact of the recession on southeastern North Carolina. But they know the economy is unstable and forecasting can be dangerous, even for those who have been in the business for a while.

Sexton grew up in the retail business. Her parents owned a store in Pennsylvania and she dreamed of having her own store one day. That day came when she opened Cattail Cottage in August 2007. A few months later, the country was facing a housing market slump and a years-long recession.

“It was basically me running things at that time,” she said.

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With a brand new company, it was a tough time and Sexton had to adapt. But she survived and kept her business going. It thrives and in 2017 Cattail Cottage celebrated its 10th anniversary. But the hard times were not over.

Fast forward to spring 2020. Like many businesses across the state, Sexton was forced to close for months.

“It was scary,” she said. “I had no income.”

By then, her business had grown significantly, and the shutdown was affecting more than her.

“My employees had no income,” she said. “It was definitely a scary time.”

Again, Sexton succeeded by “taking it day by day”.

Now the country could be facing another recession, and since discretionary spending is often the first thing people cut back on, retail store owners like Sexton don’t know what the coming weeks and months will bring.

On Thursday, July 28, shoppers shop at Cattail Cottage, a home decor boutique in downtown Southport.

What is a recession?

Dr. Adam Jones, chair of the Department of Economics and Finance at the University of North Carolina at Wilmington, explained that a recession is a period of slowing economic output.

“In simple terms, that means we’re producing more or less than we’ve been producing,” Jones said. “And it could be for several reasons.”

These reasons range from fewer people working to produce goods, or those who are not working at the same intensity. A rise in the unemployment rate generally follows the slowdown in production.

Jones said based on recent numbers, he wouldn’t be surprised to see a declaration of a recession. But it may not be right away.

“The old rule of thumb was that two quarters of falling GDP is a recession,” he said. “But over time, as data availability has improved, a recession is now officially painted by the National Bureau of Economic Research, and they do so on a monthly basis.”

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He explained that experts are trying to identify where the economy peaked and then started to decline, and that point will be declared the start of the recession. But Jones said the country may have been in a recession for a few months before the statement was made.

“They tend to do it with hindsight,” he said.

One area where people might already see a bit of financial pressure is rising costs and rising interest rates, which Jones says are often tied to rising fuel costs and expectations of “what to expect.” what does the future look like?

“Prices are going up, and oh my God, prices are going up, and we’re starting to expect things to be more expensive,” he said. “So we start to cut what we buy and try to raise the price of what we sell.”

Now that gas prices are falling a bit, he said that could help stabilize things, lower inflation and keep interest rates stable.

Dennis Del Prete, owner of Dunes Mercantile, a gift shop and guitar bar located in the 8600 block of East Oak Island Drive, displays some of his stained glass artwork on July 28, which along with works by other artists premises, are for sale in the shop.

What might a recession look like?

Predicting what a recession will look like or how long it will last can be tricky, and Jones said economists are often wrong.

“We missed the Great Recession,” he said. “We said, ‘It’s not going to be so bad’ and it turned out to be bad.”

But he thinks the country has learned a few things since then, particularly about the housing market.

“Right now we don’t have as many low and medium standards as we used to,” he said. “I remember before the Great Recession, you would walk past a subdivision and there was a sign – ‘Today! 110% financing, and you’re like a holy cow! They’ll lend you more money than the house is worth!

He said that meant people were starting upside down in their mortgages and quickly getting into financial trouble, and the banks weren’t in a strong position. Overall, Jones thinks the country is in a better financial position, and if there are losses, he doesn’t see them as the “crisis” of 2008.

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He said people need to focus less on what’s happening nationally and pay more attention to what’s happening locally with people’s discretionary spending and travel.

“The local economy has really moved,” he said.

A good indicator, he said, is the number of room occupancy taxes in southeastern North Carolina, which shows dramatic increases from pre-pandemic levels.

“We’ve had a huge boom in people bringing their discretionary dollars to southeastern North Carolina,” he said. “What happens as things continue to return to normal?”

Jones pointed out that as people start to feel more comfortable with air and international travel, it could have a significant impact on local tourism.

“And the other one is, what’s going on with the work from home or the remote work situation?” He asked. “As people are called back to the office, are they going back to where they came from, or are they looking for jobs or are they trying to create their own opportunities here in Wilmington?”

Dennis Del Prete, owner of Dunes Mercantile on Oak Island, checks out his stock of guitars July 28.

Impact on local businesses

At present, several local business owners say they are still enjoying a busy tourist season and the pandemic boom.

Jamie Shepard, who opened Little Locals Clothing Co. on the Cotton Exchange on July 11, was unsure how business would turn out as they opened in the middle of the season. She explained that she and her husband were initially conservative in their estimates.

“We tried not to have too high expectations,” she said. “But so far we have done better than we thought.”

Shoppers walk through the Cotton Exchange in downtown Wilmington.

As new business owners, Shepard said they’re concerned about the impact of a recession, and to help them prepare for slower times, they’re working on a website to grow their customer base.

Dennis and Jackie Del Prete also saw their sales exceed expectations. The couple bought Dunes Mercantile on Oak Island three and a half years ago – just before the pandemic hit. They have transformed the old consignment shop into a gift shop, featuring high-end artwork, locally made items and a guitar bar. Although their business is new, Dennis Del Prete explained that they have only seen growth year after year.

“Every year we exceed the previous year and our expectations are met – and even better,” he said.

On July 28, a sign invites shoppers to enter Cattail Cottage, a home decor shop in downtown Southport.

He thinks a lot of this has to do with the influx of visitors who often tell him how much they “love the quaintness of this area”.

“This hidden gem, which no longer hides, is truly more popular than a crowded beach,” he said.

As for a recession, Dennis and Jackie say they believe tourism will continue to provide a steady stream of income during peak season, as well as their local customers who are often “retired and financially strong”.

Sexton agrees the region could be somewhat isolated from the financial impact.

“Maybe we’re not far enough along to know how this is going to affect business,” Sexton said. “Being a coastal town and a tourist area, they always tend in my opinion to fare better than places that aren’t touristy. Maybe we won’t feel it as much, but it’s hard to say.

But after nearly 15 years in the business, Sexton knows it’s about anticipating any challenges that may arise.

“I don’t think anything in retail is very consistent anymore,” she said. “It hasn’t happened since 2008. It’s either a party or a famine, and when you’re in the famine you have to make adjustments, and when you party you have to make a plan for the time being. where you’re starving.

“If I’ve been through the crash and I’ve been through COVID, I’m going through a recession. I have no choice; it’s my livelihood.