UF Economists: Consumer Confidence Monthly Gain Nets Five-Year High

January 27, 1998

GAINESVILLE — Florida’s consumer confidence registered its largest monthly gain in the past five years in January, reflecting a post-holiday optimism far beyond expectations, University of Florida economists report.

The preliminary consumer confidence index for the month rose five points to 104 in January, largely because of optimism about personal finances and perceptions about it being a good time to buy big-ticket items, said economists with UF’s Bureau of Economic and Business Research, which conducts the survey.

“Although it is not uncommon to see gains in consumer confidence immediately following the holidays, an increase of five points was far from expected,” said Chris McCarty, the survey director. “Most of those who were optimistic about their personal finances attributed it to wage increases and promotions. Those who think it is a good time to buy expensive items like appliances and furniture say that prices and interest rates are low. Many said that after-Christmas sales, combined with the anticipation of rising interest rates, means now is the time to buy.”

The only one of the five components that make up the survey to register a decline was the measure of expectations about the national economy over the next year, he said.

“The gain in confidence in January is shared by all groups of Floridians,” said UF economist Dave Denslow. “Young and old, men and women, high school drop-outs and college graduates all report they are better off than a year ago and that now is a good time for major purchases. All of these groups are sharing in wage gains, enjoying clothing and electronic sales and taking advantage of lower interest rates.”

High consumer confidence through the holiday season eventually translated into an increase in retail sales of more than 4 percent over 1996, McCarty said. But retailers were forced to offer discounts and sales in order to realize those gains, he noted.

Consumer confidence increased for all four of Florida’s regions from December to January. The largest gain was in southeast Florida, where confidence rose nine points to 107, and the smallest one was in north Florida, where it inched up two points to 101. Both Central and southwest Florida experienced four-point gains.

Employed Floridians gave mixed reports of business conditions. Forty-six percent — compared with 48 percent in December and 49 percent a year ago — said business was higher than at the same time a year ago. But the share who expected extra employees to be hired at their workplace in the next six months rose from 30 percent in December to 33 percent in January.

The Florida Consumer Attitude Survey is conducted monthly by the bureau. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for January was calculated from 864 responses. Numbers for prior months are based on about 1,000 responses. The margin of error for the index is 2 percent.

The consumer confidence index and its five components are not percentages. The minimum value for these indexes is two if all respondents answered pessimistically on all five questions and 150 if all respondents answered optimistically on all five questions. The index is benchmarked to 1966, so that a value of 100 represents the same level of confidence for that year.