UF Economists: Consumer Confidence Experiences First Drop In Months

November 25, 1997

GAINESVILLE — Even though Florida’s consumer confidence fell in November for the first time in seven months, its relative strength bodes well for lucrative holiday sales, University of Florida economists report.

The preliminary consumer confidence index for the month dipped to 100, a two-point drop from October, when it reached an eight-year high, said economists with UF’s Bureau of Economic and Business Research, which conducts the survey.

“Confidence is still very high, reflecting the optimism of consumers going into the holiday season,” said Dave Denslow, a UF economist. “Given that the components measuring current finances are higher than last month and much higher than a year ago, we still feel that retail sales this Christmas will be up 5 percent over last year. That would mean a very healthy holiday season, even though consumers are becoming slightly less optimistic about the economy in 1998.”

Reduced optimism about personal finances, the nation’s business conditions over the next year and whether it is a good time to buy big ticket items are to blame for the drop in overall confidence, Denslow said. Caution was most pronounced among women and people over age 60, he said.

Nationally, retail sales fell in September and October, with the decline due entirely to lower automobile sales, Denslow said. Excluding automobiles, sales in October were up 0.4 percent over September, he said.

“With the onset of cold weather, low inflation, unemployment and interest rates, and unusually high consumer confidence, we feel that retail sales will turn around in November and December,” said Chris McCarty, the survey director. “If we were ever going to predict high sales based on consumer confidence, it would be now.”

On the downside for retailers, consumer debt has been decreasing over the past several months, particularly revolving credit such as credit cards, McCarty said.

“There is a definite trend towards consumers refusing to take on more debt, despite very low interest rates,” he said.

For their own good, retailers should plan on holiday sales beyond the traditional time frame, as last year’s shoppers sought after-Christmas bargains, driving up post-holiday sales, McCarty said.

Since 1983, the December share of retail sales has declined as people have become less seasonal in their shopping, Denslow said. Consumers are extending their buying over a longer period of time, perhaps in the hopes of getting good bargains, he said.

Except for Central Florida, all of Florida’s regions experienced a decline in consumer confidence from October to November. In southwest Florida, confidence fell from a 12-month high of 104 to 101, the biggest drop for any region. But UF economists suggest interpreting these regional findings with caution, as they have a higher margin of error because they are based on fewer observations per region than the state as a whole.

The bureau conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for November was calculated from 828 responses. Numbers for prior months are based on about 1,000 responses.

The margin of error for the statewide index is three points, while that for the regions ranges between four and five points.