UF Economists: Florida Consumer Confidence Drops Four Points

August 31, 1999

GAINESVILLE — Consumer confidence in Florida dropped four points in August, reflecting growing pessimism about higher interest rates, worries about the Y2K computer glitch and the national economy in general, University of Florida economists report.

The preliminary index for August fell to 102, said Chris McCarty, survey director with UF’s Bureau of Economic and Business Research.

“Consumers in Florida may be seeing some signs of weakness in the economy,” McCarty said. “Although the traditional indicators such as inflation and employment levels still suggest a robust economy, two consecutive rate increases by the federal reserve translate into higher interest rates on mortgages and credit cards. With Y2K approaching, some consumers might be expecting a weaker economy in the next year.”

The Y2K glitch, a programming snag that will cause some computers to misread dates after the turn of the century, has some people concerned about financial and other disruptions.

Perceptions of U.S. business conditions during the next year fell from 110 to 99, and those for the long-term national outlook dipped from 93 to 88.

Despite the drop in the outlook for U.S. business conditions, consumers still are taking advantage of favorable buying conditions, McCarty said.

Sales of new and existing homes rose to near record levels in June and July as consumers tried to lock in low mortgage rates, McCarty said. Meanwhile, retail sales rose .7 percent between June and July, up 9.1 percent from a year ago, he said.

“Floridians’ confidence stands today almost exactly where it was a year ago,” said UF economist Dave Denslow. “The pattern of responses with respect to all personal finances and the outlook for the U.S. economy are virtually identical. The index now is still only 6 points away from the record high of 108 registered in February of this year.”

Denslow said it will be interesting to see what happens to consumer confidence as the end of the year approaches. “Some will no doubt expect significant repercussions due to Y2K while others will largely ignore it,” he said. “If enough people react, this, in and of itself, could weaken the economy.”

The only component to rise was that measuring perceptions of whether it is a good time to buy, increasing two points to 123.

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 476 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.