WASHINGTON COUNTY — Washington County’s economy is starting to gain strength in the retail sector — just in time for Christmas, according to the latest sales tax collections data.

In the first nine months of this year, spending fell 4.5 percent across all kinds of business in the county compared to the same period a year ago, according to a Herald-Mail analysis of the data.

But in the general merchandise category — department, discount, sporting goods, toys and other such stores — sales actually held steady from January through September compared to a year ago, the data shows.

October’s sales tax reports, reflecting September’s purchases, were the more recent available from the Maryland Comptroller of the Treasury.

They show an interesting sign: This September, for the first time since January, general merchandise sales increased in local stores over that same month last year. The data shows sales jumped 4.9 percent over purchases here in September 2008.

That’s encouraging news, said Stacey McGee, who teaches economics at Hagerstown Community College.

“You hate to make predictions based on one month, but it’s a good thing that it’s not going back down,” McGee said.

Jimmy Feltz, manager of Kmart off Massey Boulevard in Valley Plaza on Hagerstown’s southwestern edge, said he already is seeing signs of a stronger Christmas season, at the least.

“Especially for September, we noticed definitely, the customer starting early,” Feltz said. “That was a big difference from the past two years.

“And layaways (are) just through the roof. We’ve already outdone what we did last year for the whole Christmas season. Probably three weeks ago, we had already topped that number clearly — all the different corners (different kinds of merchandise) of the building.”

What does it mean?

Whether the county’s economy is rebounding or the latest signs are deceptive is far from clear and certainly not to be judged by retail sales alone.

Economists “want to see two consecutive quarters of this before they make a more positive statement,” McGee said. “So by the time they finally said, ‘We’re in a recession,’ they said, ‘We entered it nine months ago.’”

Experts look at leading, coincident and lagging indicators to judge when significant economic change is happening, McGee said. The signs include many more factors than can be measured on a localized basis.

One leading indicator — changes that usually occur in advance of economic swings — that The Herald-Mail tracks monthly is building permits. A cursory look there shows no consistent trend back toward a growing economy.

Other such indicators include production workweek, unemployment insurance claims, money supply, inventory changes and stock prices, McGee said. Nationally, she said, “those leading indicators have been going up, mostly for the last six months, not steadily, but mostly.”

Coincident indicators, those that occur simultaneously with today’s business cycle, include nonfarm payrolls, industrial production, personal income, and sales from manufacturing and trade, she said.

So-called lagging indicators include unemployment, corporate profits, labor cost per unit and interest rates, she said.

The county’s jobless rate, a lagging indicator, has been in the 9 percent to 10 percent range all year, compared to last year’s 4 percent to 6 percent range.

The jobless rate improved from 9.8 percent to 9.4 percent in September. On Monday, Maryland is to release the county’s October rate.

Whatever it reveals about the local economy, it won’t show whether we’re recovering or how close we are, McGee said.

The nation’s gross domestic product (GDP) — essentially, the market value of all of the goods and services produced — shows that the economy in the July, August and September quarter began growing again after four straight quarters of contraction.

Many economists are seeing that as a sign of health, “but it could still be a while before unemployment improves,” McGee said.

“When we went into the recession, companies continued to produce and sales slowed down, so the inventory starts to build up,” she said. “So now, they’ve got all this inventory built up, they’re going to want to use up all this inventory before they start hiring again. And the other thing is, they want to make darn sure we’re out of this before we start hiring again.

“So you can be out of the recession a good six months before you start to see an increase in employment or a decrease in the unemployment rate.”

Tracking how much shoppers are spending compared to previously gives you a good idea what’s happening now, McGee said.

“You don’t actually see retail sales as one of the indicators, but you can see how they relate,” she said. “Higher sales lead to higher production, and that boosts the economy.”

What we’re spending

Based on the data for Washington County, The Herald-Mail determined that we — you, me and everybody else — spent about $1.16 billion here from January through September.

By comparison, we spent $1.21 billion here during the first nine months of 2008.

What Maryland classes as the “general merchandise” kinds of businesses accounted for the largest single share of that in both years in the county.

In all, we spent about $316.8 million in those kinds of stores in the first nine months, down just slightly from the $319.6 million we spent in the year-ago stretch, the analysis shows.

In September alone, we spent about $35.3 million in such stores here, or nearly 5 percent more than the $33.6 million we spent there a year ago.

In fact, in recent months, sales in this economic sector have been holding up more strongly here than statewide.

During the July, August and September quarter, when purchases at such stores rose 1.2 percent here on the strength of September’s increase, they fell nearly 1.5 percent throughout Maryland.

Statewide, in September alone, sales climbed just 2.6 percent at such stores.

The numbers sound hopeful for Washington County and, though less strong, for retailers throughout the state, said Tom Saquella, president of the Maryland Retailers Association since 1985.

Sales have been rising for some stores since August and for some, since September or October, Saquella said.

For many, “the amount of loss compared to a year ago is narrowed, even if sales haven’t increased. We think the worst is over, but it’s going to be a long recovery. But at least the numbers are pointing upward,” Saquella said.

“The unemployment is still a serious problem and will certainly hurt sales. (But) we were in a crisis 12 months ago,” he said.

During the Christmas season a year ago, “sales were down, I think we figured in Maryland, a little over 3 percent, and the year before, they were down as well — almost 4 percent,” Saquella said.

A new survey indicates that many of the association’s 600-plus retailers are “cautiously optimistic — not wildly optimistic,” he said.

Of those sampled, “over half were optimistic about the season compared to less than 20 percent last year,” he said.

Driven by electronics

Steven James, manager of the Wal-Mart Supercenter off Garland Groh Boulevard near Hagerstown’s western fringe, wasn’t surprised the tax data shows retail sales grew from last September to this.

There are “different electronics that actually drove some of that sales,” James said. “Laptops got cheaper, those kind of things” happened, he said.

“If last year, laptops were $498 and this year, $298, you understand what I’m saying? The industry’s come down on electronics during that time,” James said.

Both he and Kelly Cheeseman, a spokesman at Wal-Mart’s corporate headquarters in Bentonville, Ark., declined to talk about sales figures or whether they have increased at the local store. Cheeseman also wouldn’t talk about the local Sam’s Club store.

However, Cheeseman did say that “Wal-Mart collected on behalf of the State of Maryland more than $153.3 million in sales taxes” in fiscal 2009, which for the chain is from Feb. 1, 2008, through Jan. 31, 2009.

Using the state’s 6-cent sales tax rate, that would equal more than $2.5 billion in sales for the chain’s 44 Wal-Mart stores and 12 Sam’s Club stores in Maryland.

Asked how much Wal-Mart collected in sales taxes for the state in fiscal 2008, Cheeseman declined to provide any more such information.

For a broader look at the chain, she referred a reporter to Wal-Mart’s Web site for investors. It reports that the company achieved record earnings, helped by improved inventory management in its August, September and October quarter.

Its net sales in the quarter rose 1.1 percent compared to the year-ago period, the Web site said. Wal-Mart reported weakness in one crucial indicator — sales at U.S. stores open at least a year, known as same-store sales, fell 0.4 percent.

The Tribune said Wal-Mart forecast that fourth-quarter earnings, which include the Christmas shopping season, could fall short of Wall Street’s estimates.

The newspaper’s Web site said the company attributed the same-store sales decline solely to falling prices. It quoted Eduardo Castro-Wright, who oversees Wal-Mart’s U.S. operations, as saying the results were “driven by price deflation that was well beyond what we had expected, across many food categories, as well as electronics.”

‘How can we help?’

Meantime, over at Hagerstown’s Kmart, Feltz said customers seem to be coping with the economy better now.

“We did kind of struggle through the summer, but as the winter and fall merchandise came in,” sales picked up, Feltz said. “You could tell, even just talking to folks, ‘I’m getting it done’ or ‘I’m getting a little bit done a bit at a time.’”

For the local Kmart, two special efforts seem to have especially helped, he said.

One was “a huge focus on our in-store basic items. We really tried to focus on having those above all else — toothbrushes, cereal, shampoos. Obviously, somebody’s going to pass up a video game when they need garbage bags.

“I think that helped us keep people coming back. And then, as bonuses came in, as things maybe came back around, they remembered us.”

Also, in late summer or early fall, the store did a companywide program to show “how can we help, even in times of need? We ran a program for the unemployed. All you had to do was prove your unemployment and you were able to shop and get 20 percent off Kmart brands of stuff,” he said.

Feltz said he’s cautiously optimistic about this holiday season.

He said he didn’t know offhand what the store’s sales totaled for last Christmas, “but I know that on Black Friday, we did $250,000. That was a jump from ’07. In ’07, we did about 215 (thousand dollars), 220 (thousand dollars).”

Reason to hope

The analysis of the sales tax data shows some interesting trends for other parts of the county’s economy, too.

For instance, spending at local restaurants, supermarkets, and other such food and beverage outlets increased more than 5 percent during the first nine months of this year, compared to a year ago. The category is the county’s second largest economic sector.

But every other sector here still is showing the problems of the recession.

Furniture and appliance sales are down 20 percent overall. Sales in the building and industrial supplies sector fell 16 percent overall.

Businesses of nearly every kind throughout Maryland continue to struggle, according to the sales tax data.

In a report Nov. 17 to Gov. Martin O’Malley and other top state leaders, state Comptroller Peter Franchot said general fund sales tax receipts for September sales fell 5.4 percent in October. He said they remain down 7.5 percent for the year.

But, Franchot said, there is reason to hope.

“While perhaps not indicative that we have passed the bottom, October’s relatively mild monthly decrease in gross receipts, (of minus 6.2 percent), represents the smallest decline since March,” he wrote.

Maryland’s sales tax data is issued monthly. It shows how much “sales and use tax” businesses have collected in each county.

The “sales tax” part of that is the 6-cent tax on every dollar people spend on taxable goods bought in Maryland. Basically, the “use tax” is a 6-cent sales tax on taxable stuff you buy out of state, but use here.

The “use tax” is hard to measure when it comes to stories that examine spending patterns in any one area. A technician who helps compile the state reports said he finds that the “use tax” generally is 1 percent to 2 percent of the overall “sales and use tax revenue.”

For our analyses, therefore, The Herald-Mail ignores the fact that a very small part of the tax collections reported isn’t from purchases made at Maryland businesses.