UF Survey: Despite Rising Interest Rates, Consumers Remain Confident

May 30, 2000

GAINESVILLE, Fla. — Despite rising interest rates, consumers in Florida continue to be optimistic about the economy and upbeat about their personal finances, according to the latest consumer confidence index released by University of Florida economists.

The preliminary index for May remained flat at 106, but Florida residents were more optimistic about their personal financial situations than they were a year ago, according to UF’s Bureau of Economic and Business Research. Perceptions of personal finance rose four points from 103 to 107, balancing a decline in perceptions of short-term U.S. business conditions from 107 to 101.

“With the half-point increase in interest rates, we would have expected some consumers to react negatively,” said Chris McCarty, survey director. “It appears that consumers have not anticipated how the Federal Reserve’s actions might impact their wallets.”

McCarty added that despite Fed officials’ fears, the continued spending pattern of consumers has not resulted in rising inflation. With unemployment at its lowest level in 30 years, consumers are able to sustain their spending.

The May index did contain a few surprises, McCarty said. Prominent among these was a two-point rise in confidence among residents older than 60. Although people in this age group remained less confident than those 60 and younger, they were markedly more optimistic about their personal finances, with that component rising 11 points from 76 in April to 87 in May.

“Compared to younger residents, fewer seniors are receiving pay hikes, and more of them are paying higher medical costs or working less, sometimes for medical reasons,” said Dave Denslow, a UF economist. “But when interest rates rise, that’s good news for many seniors who can expect larger interest payments from their savings. Having a large number of retirees makes Florida less susceptible than most states to interest rate hikes.”

The bureau conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for May was calculated from 446 responses. Numbers for prior months are based on about 1,000 residents. The margin of error for the index is 4 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.