UF Economists: Consumer Confidence Keeps Declining As Holidays Near

October 27, 1998

GAINESVILLE — Fears that the international financial crisis could drag America down caused consumer confidence in Florida to drop in October for the third consecutive month, dampening the outlook for holiday sales, University of Florida economists report.

The preliminary consumer confidence for October registered 95, falling two points from last month and 12 points below its record high of 107 set in May, said survey director Chris McCarty with UF’s Bureau of Economic and Business Research, which compiles the report.

In the most likely upcoming holiday scenario, cautious consumers rein in their spending, opting for large discount stores over pricey establishments, and in some cases do their Christmas shopping after Christmas, he said.

“Retailers and consumers are now involved in a cat-and-mouse game,” McCarty said. “Consumers are willing to wait until after Christmas to do their shopping, partly because some have disassociated the act of buying from the holiday itself. Many retailers are aware of this shift, and given advances in inventory control, are able to shield themselves from severe overstocking.”

Worry about recession is stronger. More than one-third of the respondents (37 percent) said they believed a recession was near, compared with only 17 percent last year at this time, said UF economist Dave Denslow.

“Consumers are still very concerned about the potential impact of the international financial crisis on the U.S.,” McCarty said. “Although they are not experiencing the crisis personally, they recognize that it may ultimately impact them.”

The largest drops in confidence affected people with higher incomes, McCarty said. Among those with household incomes over $30,000, the component measuring perceptions of U.S. business conditions over the next year fell six points from 90 to 84, he said.

Three of the four regions tracked in the survey experienced drops in consumer confidence. The biggest losses were in north and Central Florida, each of which experienced four-point declines. Southeast Florida fell by two points and southwest Florida remained unchanged at 96.

As in September, consumers across regions agreed that business conditions are less favorable than they have been, he said.

There were two relatively bright spots in the regional analysis. Both southeast and southwest Florida registered modest gains in perceptions of personal finances, most likely due to the stock market’s recent recovery, McCarty said. However, those gains appear to be experienced by people under age 60, he said.

The bureau conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for October was calculated from 980 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.