News Column

Foreign Dollars a Wild Card as US Economy Slows

July 20, 2012

Douglas Hanks

shopping bags

Shopping bags in hand, a wealthy woman in a hurry ducked her head into the Rene Ruiz couture boutique this week and offered a reason why South Florida might avoid the slowdown washing over the U.S. economy.

"Could you have someone put money in the meter of my Lexus?" the woman asked co-owner Brad Rosenblatt, as she handed over four bags from nearby stores. "I'll be back."

It was a regular customer from a prominent Honduran family, in town to buy Ruiz dresses forher daughter's upcoming wedding. For a store where a single hand-made gown can cost $8,0000, catering to the indulgences of wealthy foreigners has been key to sustaining store sales through the recession and rocky recovery.

"It's not the local market that's bounced back," Rosenblatt said. "It's those who are visiting Miami to shop."

Foreign dollars present the biggest wild card as South Florida faces a summer that seems to be doubling as a turning point for economy. A big clue will arrive Friday morning, when Tallahassee releases the June employment report for Florida and its counties. Broward saw its first job loss in five years in the May report, so another decline would confirm that a new trend has taken hold.

Job growth in Miami-Dade slowed to about half the rate Miami-Dade saw at the start of 2012, a time when economists though the nationwide rebound was gaining momentum. But recent months brought some disturbing national statistics: retail sales dropping, manufacturing output slowing and consumer confidence sliding.

At the Flanigan's Seafood Bar and Grill chain, bar sales are up 11 percent this year and food sales are up 7 percent. Managers at the 22 Flanigan's locations from Kendall to Stuart had feared a backlash against the end of a $4.99 lunch deal that was popular during the recession, but the new $5.99 price didn't hurt sales, said Jim Flanigan, CEO of the chain that expects to sell $3 million worth of ribs this year.

"The reaction was more like, 'We thought this was going to happen,'' he said. "I think we're through with the major discounting."

A recovering housing market will help business more, Flanigan said, and the numbers appear to be heading that way. Sales figures released Thursday show June was the seventh month of rising resale prices for Miami-Dade houses, the longest stretch since the fall of 2006. But sales themselves dropped 2 percent, the second dip in four months.

So far, consumer spending numbers remain strong in South Florida. Miami-Dade leads the state in overall spending, closing within 1 percent of a record $3.3 billion per month set in early 2007. The only metropolitan area enjoying a recovery close to Miami-Dade is Orlando, another favorite of foreign travelers. Orlando's spending levels are down 4 percent from pre-boom levels. Spending statewide is three times worse -- down 12 percent from pre-recession levels.

But as Europe grapples with a spreading debt crisis, South Florida's international ties could prove a weakness. Wells Fargo issued a report Thursday naming Florida as facing a "high risk" from a European downturn, largely thanks to the large role European exports play in the Sunshine State's economy. European exports account for about 2 percent of Florida's $660 billion economic output each year, compared to 1.5 percent in California.

Brazil's cooling economy has analysts worried about Latin America's overall spending power in the coming years, but Europe represents the biggest threat to the U.S. economy this summer, and Europeans are particularly important to South Florida hotels during the summer. Numbers released Thursday by Smith Travel Research show June was a strong month for area hotels. The average hotel room in Broward saw revenue increase 5 percent from a year ago, while Miami-Dade hotels enjoyed an 11 percent gain.

Walter Banks, owner of Fort Lauderdale's 240-room Lago Mar resort, said European bookings are strong this summer, and that all foreign reservations are up 20 percent from a year ago. Most of those rooms come through travel wholesalers who buy the rooms months in advance, so the sales are insulated from Europe's worsening debt crisis. But Banks said last-minute trips continue from wealthy Europeans.

"What amazes me is somebody will call us and say, 'Do you have a room tomorrow for four nights? We're from Denmark,'" Banks said.



Source: (c)2012 The Miami Herald. Distributed by MCT Information Services


Story Tools