UF Study: Political Conventions Give Consumer Confidence All-Time High

August 29, 2000

GAINESVILLE — The recent Republican and Democratic national political conventions helped the Florida Consumer Confidence index soar to the highest point in its 16-year history, breaking a record for the second time this year, University of Florida economists said Tuesday.

The preliminary index for August surged six points since July to 112, said Chris McCarty, survey director with UF’s Bureau of Economic and Business Research. The previous record of 110 was set in February.

“Our record index for August reflects two facts,” said UF economist Dave Denslow. “First, the Florida economy remains very, very strong. Second, both Republicans and Democrats staged upbeat nominating conventions. The conventions boosted expectations while perceived current conditions and buying plans merely stayed high.”

Buoyed by optimism about U.S. economic conditions in both the short and long term, the index moved sharply upward after four months at the same level, 106.

Despite several interest rate increases that put the federal funds rate at its highest level since the early 1990s, consumers continue to spend, McCarty said. Retail sales excluding auto sales rose .6 percent in July, faster than income growth, he said.

“Floridians are telling us that they are still in the mood to spend money,” McCarty said. “(They) are expressing extreme optimism about the future.”

But Denslow cautioned that retailers and builders should avoid reading too much into the record confidence reading. The Federal Reserve Board’s earlier rate hikes will slow the growth of sales slightly over the next few months, he predicts.

Although the Federal Reserve Board decided at their Aug. 22 meeting to leave interest rates alone — citing signs that the economy was slowing — consumer don’t seem to share that view, McCarty said.

This raises the question of whether the Fed will raise interest rates when they meet in October and what effect that will have on the economy, or if it will decide instead to see what happens in the November election, 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 August was calculated from 426 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.