UF Economists: Consumer Confidence Drops Amid Growing Pessimism

September 29, 1998

GAINESVILLE — Florida’s consumer confidence index fell sharply in September, hitting its lowest point in 16 months and reflecting growing pessimism about everything from personal finances to short-term business conditions, University of Florida economists report.

The preliminary consumer index for September registered 97, losing four points from last month, said survey director Chris McCarty, with UF’s Bureau of Economic and Business Research, which compiles the report.

“Although confidence is still high, there are signs of growing unrest among consumers, particularly those in the upper income brackets,” McCarty said. “Respondents with annual household incomes greater than $30,000 registered an 11-point drop in their perceptions of U.S. business conditions over the next year, and the overall component for middle and upper income brackets is at 88, the lowest it has been since August 1996.”

Four of the five components that make up the index dropped: the outlook on current personal finances, future personal finances, short-term U.S. business conditions and whether it is a good time to buy big-ticket consumer goods, McCarty said. Only the component measuring perceptions of U.S. business conditions over the next five years remained steady.

“With recession in Japan, near-depression in Southeast Asia, default by Russia, the threat of default by Brazil, a roller-coaster stock market, slowing tourism and the possibility of a presidential impeachment, the real question is not why confidence has edged down, but why it remains high,” said UF economist Dave Denslow. “Floridians are clearly less impressed by the news than by their own experiences. Few are unemployed, mortgage rates are low and inflation remains inert.”

Consistent consumer spending, with second-quarter sales rivaling those of the first quarter, have made U.S. business conditions relatively immune to the effects of the international crisis until now, McCarty said. While national economic indicators still suggest a favorable economy here in the United States, economic troubles in Asia, Russia and most recently Latin America continue to unfold, he said.

Three of the four regions tracked in the survey experienced drops in consumer confidence, with north Florida being the exception. The biggest plunge occurred in Central Florida, where the index fell seven points to 99 in September, possibly due in part to recent declines in tourism, he said.

Employed Floridians continued to remain optimistic about business conditions. Forty-eight percent — the same as in August — said business was better than at the same time a year ago. The share expecting extra employees to be hired at their workplace in the next six months increased two points to 39 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 September was calculated from 1,000 responses. Numbers for prior months are based on about 1,000 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.