UF Economists: Florida Consumer Confidence Hits New Eight-Year High

July 29, 1997

GAINESVILLE — Florida’s consumer confidence index hit an eight-year record in July, thanks to optimism about the national economy and the perception that now is a good time to buy big-ticket items, University of Florida economists report.

The preliminary consumer confidence index for the month rose to 101, gaining two points from June, said economists with UF’s Bureau of Economic and Business Research, which conducts the survey.

The last time Florida’s index reached 101 was in June 1989, a year before the beginning of the last recession.

“Consumers’ attitudes are still reflecting what appears to be a strong economy,” said Chris McCarty, the bureau’s survey director. “While there have been signs of weakness in the retail market, inflation remains uncharacteristically low given the low levels of unemployment and modest rises in hourly wages. People seem to be telling us that they are doing fine and anticipate continued growth.”

Since July 1996, Florida’s confidence index has risen by 10 points, buoyed by optimism about the national economy. Two-thirds of Floridians say good times will last into the opening of the next century, and 83 percent of the respondents expect no recession during the coming year, up from 73 percent a year ago, McCarty said.

On the negative side, car sales fell in June, down sharply from 1996, and retail sales, weak in the first quarter of 1997, rose by only 0.5 percent, McCarty said. While discount department stores such as Target and Wal-Mart are enjoying greater sales, inventory is piling up at high-end department stores, he said.

The good news is that debt-service payments have begun to level off after nearly four years of steady increases, thanks to banks adopting less aggressive credit strategies and consumers changing their priorities to pay off debts, he said.

“People seem to be taking advantage of an economy where inflation is low and interest rates are low by being more frugal in their spending and beginning the process of paying for past purchases,” McCarty said.

“One nagging worry, since 3 million retirees in Florida own a large chunk of Wall Street, is what would happen if the soaring stock market suddenly returned to earth,” said UF economist Dave Denslow. “But among our respondents who own stocks, only 12 percent say a market plunge would scare them off. Come bull or bear, the rest plan to keep their shares.”

Two of the five indicators that make up the index rose last month. Consumers’ perceptions about whether it is a good time to buy expensive items rose four points from last month to 116, and consumers’ expectations about the national economy over the next five years increased six points to 85.

Perceptions about current finances fell four points, from 95 in June to 91 in July, while the other two index components experienced little or no change.

Employed Floridians gave positive reports of business activity. The share of respondents claiming business was better than at the same time a year ago increased three points to 53 percent. At the same time, the share who expected extra employees to be hired at their workplace in the next six months increased one point to 37 percent.

“From the perspective of employees, it appears that businesses in Florida are benefiting from the strong economy as much as consumers,” McCarty said. “While there are some signs that the economy may be losing its steam, the overall picture for the near term is moderate growth.”

The Florida Consumer Attitude Survey is conducted every month by the bureau. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for July was calculated from 866 responses, a response rate of 62 percent. Numbers for prior months are based on about 1,000 responses. The margin of error for the index is plus or minus 3 percent.