AMERICAN DEMOGRAPHICS 2015

MIDWEST: RECOVERY, Delivered

“The Midwest is a more confident area, but its confidence is driven by current conditions more than expectations. There is a cautiousness that consumers are expressing going forward.”

— LYNN FRANCO, director of economic indicators at The Conference Board, an independent business membership and research association

ECONOMIC OVERVIEW

While the Midwest has been slower than other U.S. regions in the past to grasp economic recovery, this year it is clearly picking up steam. The jobless rate is ticking in at a number lower than that of the U.S. overall, and consumer confidence is coming in strong.

JOB LOSS

The Midwest experienced a nice drop in its unemployment rate from 7.2% in June 2014 to 5.0% in June 2015, according to the Bureau of Labor Statistics (BLS). With the unemployment rate ringing in at 5.3% for the overall U.S. in June 2015, the Midwest is currently seeing one of the lowest jobless rates in the country.

CONSUMER CONFIDENCE

The Midwest’s healthy unemployment rates have buoyed consumer confidence here.

In the region’s West North Central sector, the Consumer Confidence Index (CCI) was reported at 106.5 in May 2015, according to The Conference Board. This revealed a higher confidence than the country as a whole—the CCI for the U.S. rang in at 95.4 in May 2015 (1985=100).

In the Midwest’s more urban East North Central region, confidence was slightly lower at 96.9 in May 2015, according to The Conference Board. This number is still notably higher than the 83.8 reported here in May 2014.

COST OF GOODS

On a positive front, the Midwest has seen a decrease in inflation this year. The Consumer Price Index (CPI/the prices paid by urban consumers for a representative basket of goods and services) for all urban consumers dropped by 0.7% in June 2015 from June 2014, according to the BLS.

This was a different story from the overall U.S., which saw a slight .4% CPI increase from May 2014 to May 2015.

RETAIL REAL ESTATE

While the Heartland boasts a healthy jobless rate and strong consumer confidence, the retail real estate market here is the slowest of any region in the U.S.

“They’re still trying to figure things out here, so the Midwest has the lowest rents and highest vacancy rates in the country—and this will continue to be the case,” says Ryan Severino, a senior economist with Reis, Inc., a leading provider of commercial real estate information. “This is the part of the country going through the structural changes of being a labor-intensive economy as compared to today’s capital-intensive economy.”

VACANCY RATES

As such, the Midwest region reported a retail real estate vacancy rate of 12.7% for the second quarter of 2015, according to Reis, Inc., which remained the same as the vacancy rate reported in the first quarter of 2015.

By comparison, the Q2 2015 rate is higher than the overall U.S. vacancy rate, which came in at 10.1% in the second quarter 2015.

RENTS

The Midwest is singing a similar tune when it comes to retail real estate rents. Reis, Inc., reported asking rents here at $16.41 for the first quarter of 2015—a 19-cent increase from the asking rent reported in Q1 2014, which was $16.17.

METRO MARKETS

While real estate recovery is slow at best here, a few of the Midwest’s urban areas revealed better than average growth.

CITIES TO WATCH

A surprising standout, Cincinnati reported a slight decline in vacancy rates—down to 12.1% in Q2 2015 from 12.7% in the second quarter of 2014.

Asking rents also moved up ever so slightly here from $14.95 in the second quarter of 2014 to $15.19 in Q2 2015.

The Queen City’s jobless rate was also healthy—at 4.1% in May 2015 down from 5.2% in May 2014.

Over in Chi Town, the retail real estate vacancy rate is on the decline—down to 12.3% in the second quarter of 2015 from 12.6% in the Q2 2014.

At the same time, Chicago’s asking rent moved up slightly in the second quarter of 2015 to $19.63 per square foot.

The jobless rate also continued to dip down in the Chicago area to 6.3% in June 2015 from 7.3% in June 2014—and 10.1% in June 2013.

FASHION TRENDS

The media-savvy Midwest today has much less of a trend-adopting lag time than in decades past.

A key fall trend that will undoubtedly be adopted by the Midwest is a “Nordic Tracking” theme, which is a focus on Scandinavian sensibilities with icy white and soft blue as the dominant hues, according to The Doneger Group, a trend forecasting service. Looks include clean, simple suiting and matched sets in monochromatic messages, tailored sheaths, and simple sweater dresses.

“The Midwest now pretty much aligns with the Northeast in a lot of ways,” says Roseanne Morrison, fashion director at The Doneger Group. “The differences are generally in colors and things like the weight of fabrics.”

MIDWEST in focus

LENS MARKET

FREE-FORM: The Midwest is following form with the rest of the nation regarding sales of free-form/digitally surfaced lenses, in that each year it sees a higher percentage of sales than the previous year. This year the region ties with the South for highest percentage of digital design lens sales, coming in at 62% of total lens sales. That’s a full 6% over the national average. This is the second year in a row it has seen impressive growth (a 22% jump alone over last year!) after several years of up-and-down sales performance.

MATERIALS AND EXTRAS: Though polycarbonate tops the charts in the Midwest as well as the rest of the country, it is interesting that poly has the lowest market share here compared with other materials. With 45% of ECPs citing poly as their most-used material, they have the highest citations of the nation for other materials such as plastic (20%), Trivex (23%), and high-index (12%). All of those percentages represent increases from last year (Trivex alone saw an 8% jump). The Midwest is gaga for its AR, with 89% of respondents citing it as their most-sold extra, an 8% jump from last year. However, the region’s numbers for photochromics (9% cited as most-sold) and polarized (2%) ranked last in the nation.

PRESBYOPES: Nothing unusual here regarding the PAL/single vision split, except that the Midwest reports exactly 50% of its lens sales as PALs—by 1% the highest in the nation. Single vision lens sales come in at 47% of total sales.

GOING DIGITAL: Maybe it’s Midwestern common sense, but folks here apparently believe in protecting their eyes from digital eye strain and blue light. With 40% of ECPs in this region reporting digital protection lenses as their fastest growing specialty, they lead the nation.

FRAME MATERIALS: A LOOK AT THE LATEST IN FRAME SALES AND TRENDS IN THE NORTHEAST

ROCK STEADY

The Midwest seems to be in a good place, inventory-wise, leading the nation in retaining pricing strategies (56%). Accordingly, the region trailed behind in terms of expanding to include higher price points, lower price points, or both (23%, 5%, and 16%, respectively)

ON THE EDGE: MIDWEST REGION