UF Survey: Refusal To Rein In Spending Signals Confidence In Economy

July 25, 2000

GAINESVILLE — The Florida Consumer Confidence index remained unchanged in July for the fourth month in a row, suggesting unrelenting optimism in the economy, according to the latest report released by University of Florida economists.

The preliminary index for July held steady at 106, the same level since April, and only four points below the record high of 110 set in February, said Chris McCarty, survey director for UF’s Bureau of Economic and Business Research.

“This supports the argument that consumers are not reacting to efforts to slow down spending,” McCarty said. “Sales of durable goods rose .7 percent in June. This may lead the Federal Reserve to another interest rate increase when they meet in August.”

The Federal Reserve Board held off on raising interest rates at its last meeting because members believed previous increases were leading to a slowdown in the economy, McCarty said. But many economists feel recent levels of sustained growth will ultimately result in out-of-control inflation, making it necessary for the Fed to put on the brakes by raising interest rates, he said.

In other findings, the five components that make up the index registered virtually the same as in June.

Whatever direction the economy may turn, the issue seems to be taking a back seat in the upcoming election, said UF economist Dave Denslow.

“The high level of consumer confidence poses a puzzle about the campaign for president,” Denslow said. “In 1992, the economy was recovering from the 1990-91 recession, and inflation was low. Normally in such circumstances the incumbent party’s candidate wins, but President Bush lost to Bill Clinton.”

One possible explanation is that consumer confidence was low in 1992 because the recovery was sluggish, he said.

“Today we have a booming economy and buoyant consumers, which should give Al Gore, the presumptive candidate of the incumbent party, a commanding lead,” Denslow said. “But opinion polls show him trailing George W. Bush. In election 2000, economics appears to be nothing more than a side show.”

The bureau conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for July was calculated from 414 responses. Numbers for prior months are based on about 1,000 responses. 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.