Floridiansâ€™ confidence in economy builds, UF survey finds
GAINESVILLE, Fla. — Floridaâ€™s consumer confidence keeps inching higher, rising one point from May to 82 this month — another post-recession high, according to a University of Florida survey.
June is the fourth consecutive month to show a rise in the sentiment of Floridians.
Four of the five components measured in the survey went up, and one remained the same. Respondentsâ€™ overall opinion that they are better off financially now than a year ago rose three points to 70, while their belief that their personal finances will improve a year from now remained at 82. Their outlook for U.S. economic conditions over the coming year rose two points to 83. The survey-takersâ€™ long-term view for the nationâ€™s economic health over the next five years rose one point to 83.
Finally, the survey shows that consensus of whether now is a good time to buy a big-ticket item such as a television went up two points to a post-recession high of 93.
â€śThe last time perception of current buying conditions reached this level was April of 2007,â€ť said Chris McCarty, director of UFâ€™s Survey Research Center in the Bureau of Economic and Business Research. â€śThat was the beginning of the collapse in the housing market.â€ť
Several things help explain Floridiansâ€™ current optimism. The stock market reached record highs by early June. In addition, the stateâ€™s May unemployment rate was 7.1 percent compared with the national 7.6 percent figure.
This decline from Aprilâ€™s 7.2 percent jobless figure occurred as Floridaâ€™s labor force was increasing, which meant it was due to an increase in jobs, McCarty said. Home prices have also kept rising. The median price for an existing single-family home is $171,000 — the last time it was that high in Florida was September 2008.
Consumer confidence could soon sag, however.
â€śAs we continue to collect interviews through the rest of the month the index will almost certainly be lower when it is revised as the stock market has declined in the second half of June,â€ť McCarty said. â€śHowever for now, most consumers are still not registering any fears about the effects of sequestration.â€ť
They are more concerned that interest rates may rise now that the Federal Reserve has indicated it may reduce the amount of Treasury bonds and mortgage-backed securities it has been purchasing each month to spur the economy, McCarty said.
â€śConcern over this move, however, is likely overstated for two reasons,â€ť he said. First, the Fed is unlikely to reduce the purchases completely. Instead, it will gradually reduce them, unless the economy shows signs of weakness. In that case, the Fed could be expected to resume its intervention.
â€śItâ€™s also worth noting that conditions are not the same as they were in 2008 when the Fed began making these purchases,â€ť McCarty added. Though the current housing market is being helped by lower interest rates, there has also been a low rate of new construction and an increase in population. These two factors lead to pent-up demand.
â€śHousing prices may decline from their recent highs,â€ť McCarty said, â€śbut the underlying quality of loans is now very different from 2008.â€ť Current home buyers typically have good credit scores and put 20 percent down on their homes, both of which reduce the likelihood of another massive number of foreclosures like the ones that led to the last recession.
â€śThe Fed has seen the economy through dangerous economic times,â€ť McCarty said, â€śbut the economy is now operating normally. There was nothing normal about 2008.â€ť
Conducted June 1-20, the UF study reflects the responses of 434 individuals, representing a demographic cross-section of Florida.
The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest is 150.
Details of the June survey can be found at http://www.bebr.ufl.edu/cci.