Low-income households boost Florida’s consumer confidence
GAINESVILLE, Fla. — Florida’s consumer confidence rose three points to 80 in October largely due to optimism among low-income residents, a new University of Florida study finds.
One possible explanation is that these consumers, having already experienced the worst of the housing crisis, now look forward to property tax reform, or it could be the result of some unknown factor, said Chris McCarty, director of the Survey Research Center at UF’s Bureau of Economic and Business Research.
“Consumer confidence in Florida, which has been lower than the nation, is now very close to the national number of 80.9 as measured by the University of Michigan,” McCarty said. “The source of the rise in Florida appears to be low-income households, those living off of less than $30,000 annually.
“For these people, consumer confidence was already as low as it has been for a long time, so it’s almost to the point where the only way it could go was up, whereas there was still room for confidence among middle- and upper-income households to decline, which turned out to be flat this month,” he said.
While consumer confidence among middle- and upper-income households has remained the same at 81, the measure for low-income households rose from 66 in September to 75 in October, he said.
“The rise in confidence among low-income households appears to be driven by improved personal finances now compared to a year ago and expectations about improvement over the next year,” McCarty said.
Among this group, there was a huge increase in perceptions about whether it is a good time to buy big-ticket items, from 68 to 86.
“Respondents may have already factored in the ill effects of housing and are anticipating improvement,” he said. “They may also be looking toward property tax reform from the Florida Legislature as a source of relief as the governor and Legislature considers property tax cuts.”
The housing debacle has hit Florida hard compared to the nation as a whole, McCarty said. Florida, along with California, Arizona, Nevada and parts of Washington, D.C., have suffered very large declines in sales and housing prices, he said.
Last month’s overall consumer confidence was revised downward two points to 77 after all completed surveys were included in the index.
The rise in this month’s confidence was due to increases in three of the five components that make up the index. Perceptions of U.S. economic conditions over the next year rose six points to 75, perceptions of whether it is a good time to buy big-ticket items rose four points to 85 and expectations of personal finances a year from now rose four points to 90.
The two components to experience declines were U.S. economic conditions over the next five years, which fell two points to 78, and perceptions of personal finances now compared to a year ago, which fell one point to 70.
On the positive side, gas prices declined briefly in October, but they are likely to go up as oil prices on the international market rise, he said.
Such a price increase would occur just as the holiday season approaches, McCarty said. “Retailers will very likely slash prices early to get otherwise hesitant consumers in the door,” he said.
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 October was 434 responses.
Consumer confidence is designed to help predict buying patterns by measuring the mood of consumers toward purchasing. Although other economic indicators also predict buying patterns, consumer confidence tends to be available sooner. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for the year. The value of the index is in comparing changes over time rather than looking at an isolated month.