UF Economists: Consumer Confidence Undampened By Stock Market Dip

July 30, 1996

GAINESVILLE — Despite a volatile stock market, the confidence of Florida’s consumers remained unchanged from June to July because they perceive prices to be relatively low, say University of Florida economists.

This month’s preliminary Florida Consumer Confidence Index registered again at 90, a figure similar to early national estimates, said Chris McCarty, survey director of UF’s Bureau of Economic and Business Research, which conducts the monthly survey.

“The good news from our survey is that respondents are unfazed by the rowdy stock market,” said UF economist Dave Denslow. “The competition among high-tech firms that is spooking Wall Street by holding down profits is also holding down retail prices of big-ticket items. That’s why more of our respondents are saying now is a good time to shop.”

Those who felt it was a good time to buy big-ticket items gave low prices, aggressive competition by retailers and low interest rates as their primary reasons.

“Although the overall index did not change, we see movement in its composition,” McCarty said. “Between June and July there was a drop in Floridians’ personal financial situation, but this was balanced by a rise in their perception of the U.S. economy and whether it is a good time to buy big-ticket consumer items.

“The changes in this component may be due to an expected interest rate increase on the part of the Federal Reserve and banks in general,” McCarty said. “As banks tighten their positions on credit and as consumers become more reluctant to take on new debt, we may see the index move downward.”

The index consists of five parts. Since September the component measuring whether it is a good time to buy big-ticket items has been on a wild ride, falling from 114 in that month to a low of 98 in December. The same component rose to 112 in March, fell to 102 in May and is again on its way up, registering 109 this month.

Southeast Florida was the most optimistic of the three regions for which the survey calculates results individually. It realized a five-point gain from June to register 95.

In contrast, both Tampa and Orlando experienced modest overall decreases in consumer confidence, falling three points and two points respectively. And Tampa-area consumers showed an eight-point decline in their expected personal financial situation a year from now.

Floridians who are employed gave mixed reports about business conditions at their workplace for July. The share of respondents claiming business was better than at the same time last year remained the same at 48 percent. But the share who expect extra employees to be hired at their workplace in the next six months fell from 35 percent in June to 30 percent in July.

“While businesses remain healthy, there is a reluctance to expand given an uncertain economic climate,” McCarty said. “We see the business community in Florida behaving cautiously with respect to new hires over the next few months until a better picture of the holiday season is in hand.”

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 July was calculated from 935 responses. Numbers for prior months are based on 1,000 responses. The margin of error for the index is almost three points. Regional results are subject to sampling error of almost four points. The response rate for the July survey was 55 percent.

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 confident than they were in 1966, when the index was 100.