Big-Ticket Item Doubts Dampen Consumer Confidence, UF Survey Shows

May 28, 1996

GAINESVILLE — Reluctance to buy big-ticket items, brought on by job loss, fears of inflation and the lack of further reductions in interest rates, dampened consumer confidence this month, University of Florida economists reported today (May 28).

Preliminary numbers for the month show the Florida Consumer Confidence Index slipped three points, from 91 in April to 88 in May, according to UF’s Bureau of Economic and Business Research, which compiles the report.

“The steady increase in consumer confidence from December until now was to some extent a recovery from a gloomy holiday season,” said Chris McCarty, the bureau’s survey director. “The Federal Reserve acted by lowering interest rates in January and many consumers saw this as a good time to make purchases even though consumer debt was high. Consumers now face no foreseeable reduction in interest rates and signs of a possible rise in inflation.”

Although recent employment figures have been encouraging, they may actually only reflect the replacement of higher paying jobs with lower paying ones, he said.

All five of the components that make up the index fell in May, with the biggest drop registered in consumers’ opinion as to whether it is a good time to buy big-ticket consumer items. That component fell nine points this month, its largest single-decline in the past year.

“The primary reason the consumer confidence index fell from April to May is that more low-income Floridians say that now is not a good time for major purchases,” said Dave Denslow, a UF economist. “They are worried about jobs and gasoline prices. Retailers should not overreact to the news, however. Most Floridians remain upbeat.”

Of respondents who claimed it was not a good time to buy big-ticket items, the major reason was that someone in the household lost or may lose their job.

Job loss was also cited at the top of the list by respondents who assessed their current financial situation as worse than last year. Increased debt and poor health were other reasons consumers gave for the decline in this component assessing their own financial situation, which fell three points from last month.

When asked about their future financial situation, which fell two points, nearly one-third of the pessimistic responses of consumers came from retirees who expressed concern about being on fixed incomes. Another fourth were worried about someone in the household losing their job in the coming year.

Consumer confidence also fell this month in all three regions for which the survey calculates results individually.

The sharpest drop was in Tampa, where overall confidence fell from 95 in April to 91 in May. Of greatest concern was the component reflecting whether it is a good time to buy expensive items, which fell 12 points.

Confidence also declined in another part of the survey. Reports of business activity now compared to a year ago dipped for the first time since January. Fifty percent of those who are employed reported business activity at their place of work to be higher than at the same time last year, compared to 52 percent in April. But the percentage reporting that more employees will be hired in the next six months inched up two points to 31 percent.

The Florida Consumer Attitude Survey is conducted every month by the bureau. Respondents are all 18 or older and live in households telephoned through random digit dialing. The preliminary index for May was calculated from 884 responses. Number for prior months are based on about 1,000 responses. The margin of error for the index is almost three points. Regional results are subject to a sampling error of almost four points.

The index is patterned after the University of Michigan’s confidence index for the United States. Both indexes use 1966 as the base year. Numbers below 100 indicate that consumers are less confidence than they were in 1966, when the index was 100.