Florida consumer confidence in April sinks to new 16-year record low
GAINESVILLE, Fla. — Falling housing prices, tighter credit and rising gas and food costs caused Florida’s consumer confidence to drop four points to 66 in April and surpass its previous 16-year low recorded earlier this year, a new University of Florida study reports.
Until now the revised March reading, along with January’s index, had been consumer confidence’s lowest level since December 1991, said Chris McCarty, director of UF’s Survey Research Center at the Bureau of Economic and Business Research.
“Consumer confidence in Florida is now at the same recessionary levels as it was during the 1990-91 recession,” McCarty said. “Unlike the relatively mild recession of 2001, the recession of 1990-91 resulted in a longer time to recover. This is a likely scenario for the current economy.”
Most economists believe the economy will pick up by late 2008 or early 2009, but the question remains whether it will get worse and follow the pattern of the 1973-75 recession, he said.
“The causes of lower consumer confidence are well-known to Floridians,” McCarty said. “Falling housing prices, stricter guidelines for all forms of credit, and rising gasoline and food prices are hitting consumers all at once. This has raised the possibility of ‘stagflation,’ a circumstance where gross domestic product retracts while inflation rises.”
Four of the five components that make up the index fell this month. The largest decrease was in perceptions of personal finances a year from now, which fell nine points to 79, a record low for that component. Perceptions of U.S. economic conditions over the next year fell six points to 52, perception of personal finances now compared with a year ago fell five points to 59, a record low for that component, and perceptions of U.S. economic conditions over the next five years fell four points to 72. Perceptions as to whether it is a good time to buy big-ticket consumer items rose three points to 67.
Nationally, consumer confidence as measured by the University of Michigan has fallen to a 26-year low, McCarty said. Hardest hit are low-income households that have a far more difficult time with higher energy and food prices, he said.
In Florida, consumer confidence hit a record low of 64 in December of 1991, McCarty said. Last month’s preliminary index was 68 but was revised up to 70 when the final results were in, he said.
“The question on everyone’s mind is how we are going to get out of this slow economy?” McCarty said. “The answer is probably time. Median house prices have been falling here in Florida since late 2006, and we expect prices to bottom out in much of Florida by July.”
Many homeowners have dealt with their adjustable rate mortgages being reset at higher rates by refinancing, making the required higher payments or leaving their home altogether, McCarty said. Most banks that made bad loans have reduced the book value of assets that are overvalued compared to their market value, and investors are adjusting to these write-downs, he said.
The economic stimulus package, though a welcome relief for many households, will probably not do much to change the course of events, 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 April was conducted from 533 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 that year. The value of the index is in comparing changes over time rather than looking at an isolated month.