UF Economists: Consumer Confidence Slips In Wake Of World Events

August 25, 1998

GAINESVILLE — Consumer confidence slipped in August amid volatility in the stock market, international terrorist attacks and the deepening scandal in the White House, University of Florida economists report.

The preliminary consumer index for August registered 101, down three points from last month, said survey director Chris McCarty, with UF’s Bureau of Economic and Business Research, which compiles the report.

“In some ways the big news is that confidence remains strong despite what is happening in the news,” he said. “But there is some indication that consumers are not as exuberant about their personal finances as they have been since January.”

Significant drops occurred in the survey component measuring personal finances, which dropped five points from 98 in July to 93 in August, and expected national conditions over the next year, which fell eight points during the same period from 104 to 96, McCarty said.

Even though confidence remains high, if the fall in perceptions of personal finances continue, consumers may tighten their spending by the fourth quarter, which is the holiday season, he said.

It is unclear why there was a drop in the personal finances component, McCarty said. Inflation remains low, the Federal Reserve has held off raising interest rates, unemployment remains near a 25-year low and wages are making steady gains, he said.

“August saw no jump in respondents saying they personally were worse off than a year ago, but there were fewer people reporting they were better off, ” said UF economist Dave Denslow. “Over half of Florida’s residents expect the national economy to keep growing, down from two-thirds in May. A worrisome note is that one out of four now expects a recession to start during the next 12 months. This is up from one out of eight in May.

“There also is an increased concern among some respondents that downsizing will affect them over the next few months, and more respondents say they have been laid off,” he said. “This may be in response to recent quarterly reports from several large companies that earnings have not met expectations.”

Of Florida’s four regions tracked in the survey, only southeast Florida remained steady between July and August, unchanged at 102. North Florida experienced the most dramatic decline, down six points from 103 in July to 97 in August, because of losses in perceptions of U.S. business conditions over the short and long term.

Employed Floridians gave mixed reports of business conditions. Forty-nine percent — compared with 47 percent in July — said business was better than at the same time a year ago. The share who expected extra employees to be hired at their workplace in the next six months fell one point to 37 percent.

The bureau conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for August was calculated from 914 responses. The margin of error for the index is 3 percent.

Consumer confidence is designed to help predict buying patterns by measuring consumers’ mood toward buying. Although other economic indicators also are predictors of buying patterns, consumer confidence tends to be available sooner than those indicators, McCarty said.