UF survey: florida consumer confidence steady but outlook uncertain

August 1, 2001

GAINESVILLE, Fla. — Consumer confidence in Florida dipped slightly in August, reflecting a growing pessimism among consumers that could foreshadow a weak holiday shopping season, University of Florida economists said today.

The preliminary index fell one point to 95 in August, said Chris McCarty, survey director at UF’s Bureau of Economic and Business Research. The index component measuring consumers’ perceptions of personal finances now compared with a year ago fell three points to 87, a five-year low, he said.

“The glass is half empty and half full,” said UF economist Dave Denslow. “Consumers are buoyed by falling interest rates, low inflation and a still-low unemployment rate. But news of job layoffs and slowing growth makes them wary. Our early reading of the tea leaves is that retail sales this December will be neither hot nor cold, but tepid.”

Although consumer confidence made modest increases in June and July, this was most likely due to anticipation of tax cuts, rebates and lower interest rates, McCarty said.

“A drop in the personal finances indicator to its lowest point since 1996 suggests that consumers are feeling unable to keep up the pace of spending that we have seen over the past decade,” he said. “The economic slowdown has caught up with them, and we can expect a slowdown in consumer spending over the next few months.”

Evidence of a consumer pullback is already apparent, he said.

Automobile sales fell significantly in July, and with fewer rebates or other incentives from automakers, a turnaround is unlikely, McCarty said. In what had been a robust market, existing home sales for July fell 3 percent, while overall retail sales made only small gains despite low consumer interest rates, he said.

In addition, announcements of large layoffs for manufacturing firms, particularly in the areas of telecommunications and electronics, add to consumers’ anxiety over the economy.

The last time the United States was in recession, a little more than 10 years ago, the index fell just below 70, well below this month’s reading, Denslow said. But today’s level is clearly lower than in 2000, when it averaged 107, 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 430 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 about personal finance and the economy. Although other economic indicators also are predictors of buying patterns, consumer confidence tends to be available sooner than those indicators.