UF Researchers: Strong Faith In U.S. Economy Fuels Consumer Confidence

February 25, 1997

GAINESVILLE — Florida consumer confidence in February hit another seven-year high, thanks to upbeat attitudes about the national economy among all age and income groups, say University of Florida economists.

The preliminary Florida Consumer Confidence Index rose to 96 in February, up from last month’s record-setting 95, the highest level in more than seven years, said economists with UF’s Bureau of Economic and Business Research, which conducts the monthly consumer survey.

“This latest reading is up seven points from a year ago, a rise that is driven by strong faith in the future of the national economy,” said UF economist Dave Denslow. “This growing confidence pervades all groups of Floridians — young and old, low-income and high-income, dropouts and college graduates — but is stronger for women than for men. Since February 1996, our index has risen 11 points for women, compared to five points for men.”

Consumers who are optimistic about U.S. business conditions expect more jobs, lower interest rates and a stronger economy overall, Denslow said. Those who say their financial situation is better now than a year ago continue to credit wage increases, more jobs and better money management, he said.

The share of respondents saying their personal financial condition has improved during the past year actually is down slightly, but the drop is more than offset by a larger share expecting good economic times for the nation during the coming year and over the next five years, he said.

This positive outlook makes a recession increasingly unlikely this year, despite high debt levels among some consumers, Denslow said.

“Even though consumers still face record levels of household debt, gains in jobs and wages make many willing to take on more,” said Chris McCarty, the bureau’s survey director. “One potential roadblock is the possibility of an increase in interest rates by the Federal Reserve. Higher rates would make debt more costly, which would dissuade many consumers from taking on more.”

The latest economic picture also benefits Florida retailers, McCarty said. “While consumer confidence declined through the fall, resulting in a weak holiday season for retailers, much of this is being offset by increased postholiday sales,” he said. “We expect consumers to continue their purchasing through March and most likely April as well.”

Unlike during most months, all three Florida regions tracked by the survey posted gains. Tampa had experienced the largest: five points from January to register 100. Respondents in Orlando also registered 100, a one-point gain, and those in Southeast Florida registered 97, a four-point gain.

Floridians who are employed gave mixed reports about business conditions for February. The share of respondents claiming business was better than at the same time last year rose slightly to 50 percent. However, the share who expect extra employees to be hired at their workplace in the next six months fell three points to 31 percent in February.

The Florida Consumer Attitude Survey is conducted monthly by the bureau. Respondents are 18 or older and live in households telephoned through random digit dialing. The preliminary index for February was calculated from 921 responses, a response rate of 59 percent. Numbers 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 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 confident than they were in 1966.