The holiday shopping season and end of the year is an excellent opportunity to reflect on the health of the retail industry in Northwest Indiana1 . In 2022, there was a total of $27.3 billion spent on retail goods in Northwest Indiana and this spending has been growing. Here are a few highlights from retail sales data for Northwest Indiana over the last decade or so:
Total retail sales in Northwest Indiana have risen 5.1% per year between 2010 and 2022.
Adjusting for inflation, total retail sales in Northwest Indiana have risen 2.5% per year between 2010 and 2022.
In 2022, the average resident of Northwest Indiana spent $37,867 per year on retail goods. This is 34% more than in 2010, when the average resident in Northwest Indiana spent $28,598 per year on retail goods after adjusting for inflation. Note: this ignores visitor spending and spending by residents outside Northwest Indiana.
Lake County captures the majority of these retail sales, responsible for $18.0 billion (or 66%) of the total retail sales for Northwest Indiana in 2022.
The figure below shows total retail sales broken down among the four counties in the Northwest Indiana region. If we expand our definition of Northwest to the 7-county region (adding LaPorte, Starke and Pulaski), Lake county still captures the majority of retail sales. This is not surprising as Lake County is the most populous county in Northwest Indiana (and second most populous county in Indiana) as well as the county closest to Chicago.
The last few year have been a bumpy roller-coaster due to the pandemic, particularly when it comes to the retail industry, which makes it difficult to be confident about trends. However, over time, total retail sales in Northwest Indiana have been generally rising. The figure below shows total retail sales by year between 2010 and 2022, without adjusting for inflation. The $27.3 billion of total retail sales in 2022 is the highest level recorded since these data became available in year 2000.
Of course, we have also experienced significant inflation over this period and no historical comparison is fair unless we control for changes in the price level. Adjusting for inflation, total retail sales in 2022 lags behind the all-time record of $33.3 billion spent in 2014 (in year 2022 dollars). However, coming out of the pandemic, retail sales have been growing rapidly with +8.7% growth in inflation-adjusted sales in 2021 and +15.3% in 2022.
Once data for 2023 becomes available, I would not be surprised to see a new record set for inflation-adjusted retail sales, given the very strong retail season we are experiencing right now combined with inflation falling to relatively low levels and rising real wages (earnings for Northwest Indiana workers, after adjusting for inflation, rose 5.8% between 2019 and 2022).2
Retail Sales Coming from Illinois
Given its proximity to the Chicago metropolitan area, a natural question is “How much of these retail sales are coming from Illinois residents?” Unfortunately, the Indiana Department of Revenue does not provide estimates for out-of-states sales tax collected at the county level (see note about limitations of retail sales data at the end).
Perhaps the best estimate we have of traffic flow from Illinois to Northwest Indiana comes from U.S. Census Bureau data on commuting patterns. Based on the most recent 5-year ACS community survey (2016-2020), approximately 20,000 residents of Illinois commute regularly to Lake County, Indiana for work, equivalent to about 4% of the total population of Lake County. This suggests that retail sales made to non-residents (at least those regularly traveling to Lake County) are probably a relatively small portion of all retail sales. However, this is likely a very conservative estimate as it only reflects travel for work and Northwest Indiana has experienced a significant rise in tourism in recent years, following the designation of the Indiana Dunes National Park. It’s likely safe to say that retail sales from visitors to Northwest Indiana are a significant and growing, albeit relatively small, fraction of all retail sales.
The Future of Retail Sales in Northwest Indiana
Despite the pandemic making retail sales data far more volatile than usual, I believe there is strong evidence that retail sales are growing in Northwest Indiana in a meaningful way and this trend in growth is likely to continue and even accelerate. In a recent post (More People are Choosing to Live in Northwest Indiana and that's a Very Good Sign) I provided evidence that Northwest Indiana is experiencing a renaissance in population growth in recent years. After more than a decade of decline, population is growing again in Northwest Indiana. Much of this growth can be attributed to positive net domestic migration, with fewer people moving away from the region than before, which is an excellent sign of future economic prosperity for the region. As Northwest Indiana becomes a more attractive region to work, live, and raise a family, we will have a larger population with more money to spend on retail goods. This provides not just an opportunity for retailers to take advantage of this potential growth, but to help play a part in this growth by improving shopping opportunities and experiences, particularly in terms of higher-end shopping, which will contribute to greater quality of place.
Some notes about Indiana Retail Sales Data
The retail sales data referenced here are derived from data from the Indiana Department of Revenue on retail sales taxes collected at the county level. Unfortunately, compared with most states, Indiana provides very limited and rather antiquated sales tax collection data. Limitations include only providing data annually (rather than monthly, which is more common and useful), not reporting data broken out by industry or types of goods sold, and allowing Indiana companies to report sales tax collections across multiple counties in a single county, which results in sales being undercounted for some counties and overcounted for others, although likely consistently so. For these reasons, it may be misleading to make comparisons between counties (both within Indiana and with counties in other states) and the most reliable use of these data are for trends over time and a general view of retail sales. For additional details please see:
Data Brief on The Indiana Sales Tax, by Patrick M. Barkey of the University of Montana (formerly of Ball State University)
Unless otherwise specified, the definition of “Northwest Indiana” is taken to be consistent with U.S. Census definition of the Gary Metropolitan Division and reflects the counties of Lake, Porter, Newton and Jasper.
Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages (QCEW) and Consumer Price Index (CPI). Due to data limitations, these earnings data reflect the three counties of Lake, Porter and LaPorte.