University of Florida News

GAINESVILLE, Fla. — Buoyed by a turnaround in perceptions of personal finances, Florida’s consumer confidence rebounded in September, raising questions about whether the rise will translate into holiday spending, University of Florida economists report.

This month’s consumer confidence index rose two points to 90 following a two-point drop in overall confidence from July to August, due primarily to a sharp decline in consumers’ perceptions of personal finances. The component measuring these perceptions fell 12 points to 75 last month, while it increased four points in September to 79. Perception of personal finances continued to fall among low-income households making under $30,000 a year, however, with that component falling by an additional three points to 66.

“I was surprised to see this component registering a four-point rise,” said Chris McCarty, director of the UF Survey Research Center, which compiles the report. Unlike other components in the survey, the one measuring personal finance perceptions often takes time to regain momentum, he said.

“While this does not nearly make up for the big drop in August, it does suggest that consumers are to some extent feeling more confident about their finances,” he said. “This is encouraging news at a time when we need it.”

The traditional set of economic indicators is mixed, showing an economy that could continue to recover or slide into a double-dip recession, he said. This occurs when the economy comes out of a recession but isn’t strong enough to maintain continued positive growth and quickly goes back into one again, he said.

Retail sales have been surprisingly strong, although they are by no means comparable to the heydays of the late 1990s, McCarty said. However, sales of apparel and other commodities usually associated with back-to-school and holiday shopping have been weak, he said. The most recent chain-store sales index fell 1.7 percent in September, indicating that retail sales are not as strong as some would suggest, he said.

Much of the buying has been fueled by refinancing and tapping into home equity, said McCarty, noting that overall the rates at which people are saving money has declined.

Home sales remain brisk, but foreclosures and late mortgage payments have topped previous records, indicating that lending in the real estate market may be somewhat speculative on the part of banks, McCarty said. On the positive side, there appears to have been an increase in job growth, he said.

“Looking ahead to the holiday season, the question will be whether this will translate into continued spending,” McCarty said. “Many economists are suggesting that spending will continue, pointing to the fact that many consumers today will sacrifice savings and home equity to maintain spending levels.

“My personal assessment is that this pattern cannot continue, and consumers will refrain from excessive spending during the holidays,” he said. “Holiday spending will likely grow by 3 percent over the previous year.”

UF economist Dave Denslow believes Florida has weathered the national economic slowdown well and things could be worse.

“With air tourist travel down and retirees losing wealth in equities, we could have been hit hard,” he said. “But our exposure to the telecommunications collapse is limited, tourists are still driving in, and housing values have risen as interest rates have fallen. This has been a business recession, but Florida is primarily a consumer state.”

This may be partly responsible for Floridians reporting slightly higher confidence levels this month while those measures declined in two national consumer confidence indexes.

The other components contributing to this month’s slight rise in confidence were perceptions of national economic conditions in both the short and long run.

The research center conducts the Florida Consumer Attitude survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for September was computed from 433 responses. The error rate is plus or minus 5 percent.

Consumer confidence is designed to measure the mood of consumers towards buying, and thus help to predict buying patterns. Although other economic indicators also are predictors of buying patterns, consumer confidence tends to be available sooner.

The index is benchmarked to 1966, so that a value of 100 represents the same level of confidence for that year. The value of the index is in comparing changes over time rather than looking at an isolated month.

Credits

Writer

Cathy Keen, ckeen@ufl.edu

Source

Chris McCarty, ufchris@ufl.edu, 352-392-2908 ext. 100