Permanent fund dividends pour through economy

Posted: Monday, October 15, 2001

Kenai Peninsula residents definitely have helped spur the economy since Alaska Permanent Fund dividends were deposited Wednesday.

"The last two days were as big as any Christmas," Mike Sweeney, owner of Sweeney's Clothing in Soldotna, said Friday. "It's maybe even a little stronger this year than last year, for me. We're in the third day, and yes, it's busy. Last year it was busy. The year before it was busy."

There has been talk nationwide of recession and a loss of consumer confidence since the Sept. 11 attacks, but many peninsula merchants say the effects seem smaller in Alaska, where the economy depends on oil.

"We're into work wear, and that's strong this year compared to last year, because of the oil. There's more jobs out there, and that means people need more work clothes," Sweeney said.

September sales were down slightly from last year, and that may have been because people were concerned about the attacks, he said. However, sales have been rising since.

Sweeney said it will take strong sales to surpass the total from October last year, when business was quite good. But if business continues at the present pace, sales this October could indeed surpass those in October last year, he said.

The state expects to distribute roughly 590,000 dividends totaling $1.09 billion -- $1,850.28 to every eligible Alaskan. More than 406,000 were electronically deposited Wednesday, and the state hopes to mail the rest by Nov. 2.

Kenai Peninsula residents typically use the dividends to pay debts or buy expensive items such as cars and airline tickets, said John Hoyt, Wells Fargo vice president and manager of the Soldotna branch.

"I think we still have a pretty positive perspective on the Kenai Peninsula," he said. "People are willing to utilize these funds as they have in the past."

The Sept. 11 attacks certainly affected consumer confidence, but maybe not so much in Alaska as in the Lower 48, he said. While the bank has seen an increase in savings compared to the dividend season last year, the reasons are complex, he said.

"One reason is that the stock market is not doing as well. With any downturn in the market, people hang onto more of their money and don't dump it all in as they would in a rising market," he said.

Shawn Hutchings, owner of Glacier Pontiac Buick GMC Truck, said October has been his biggest sales month since the state started handing out dividend checks.

"It definitely contributes to the success of October," he said.

This year, President George W. Bush asked the auto industry to do what it could to spur the economy following the attacks, and like many manufacturers, General Motors is offering zero-interest financing. The slow economy in the Lower 48 has meant less competition between dealers for GM vehicles, and Glacier has been able to obtain more cars this year. The effect of zero-interest financing, which GM has offered since Sept. 20, has been amazing, he said.

"That's spurred sales considerably. With the permanent fund dividends coming out, it's tremendously increased our sales from last year," he said. "In September, we doubled our sales from last year. It was slow for two weeks after the attack, but the last week was incredible."

Sales this October are on track to finish 30 percent more than sales in October last year, he said.

He said the increase at Hutchings Chevrolet, owned by his father, Dave Hutchings, has been similar.

Fred Meyer typically sees a 10-day spike in sales following distribution of the dividend checks, said Terry Rahlfs, director of the Soldotna store. Business is up this year, but the pattern is unusual.

"I'd say that in general, people are being more conservative. What we're seeing is an increase in sales of food items," he said.

He also noted increased sales of winter clothes and expensive electronics, such as televisions and stereos. He said he could not see any effects from the attacks.

Georgia Alexander, secretary-treasurer of A-1 Enterprises in Soldotna, said the dividends contribute to snowmachine sales. The store has been busy since Wednesday, she said, but there has been no noticeable difference from business last year. While many people depend on the dividends to buy snowmachines, they often place orders in March and April.

"They're reserving a 2002 model. Some are in limited supply, and some are made only on reservation," she said. "I think we're fortunate in Alaska. I don't think it has hit us as hard as some parts of the country."

The exception may be the travel industry.

Barbara Romine, district manager for One Stop Travel in Kenai, said she has seen a steady stream of people buying tickets since the dividends came out, but nothing like the numbers of previous years.

"It's a drastic change, at least a 50 percent drop, and that's got to connect with the terrorist actions," she said.

There has been little change in the number of in-state trips, she said. The decline has been in trips Outside. Even people who bought tickets before the attacks are postponing their trips.

"A lot of people are just very apprehensive, even about Christmas. We're doing a lot of fares for Thanksgiving and Christmas, but still, we're down about 20 percent," she said.

The airlines have cut fares to many cities by nearly half and cut fares to others by 30 or 40 percent.

"Still, that hasn't encouraged people to go out," she said.

That has been devastating to travel agencies.

"It's very frightening. It's definitely the type of thing that could kill a business. A lot of agencies have cut their staffs. Some have closed. Some have simply cut their salaries. You do what you have to to survive," she said.

So far, One Stop, which has offices statewide, has not been forced to cut staff or salaries.

Romine said she hopes confidence in air travel will return.

"We need people to become confident in flying. They have to have that confidence, or they're not going. That simply isn't there for a lot of people right now," she said.



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