UF survey: low interest rates help lift Florida consumer confidence

October 30, 2001

GAINESVILLE, Fla. — Consumer confidence in Florida rose slightly in October, buoyed by low interest rates and the realization that timing is good to make major purchases, but personal finances still rank as a concern, University of Florida economists said today.

The preliminary index rose to 87 in October, two points above the September level, which registered its lowest point in more than five years, said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research.

The primary source of the rise in confidence was in perceptions of the U.S. economy over the next five years, which rose seven points to 83, and perceptions as to whether it is a good time to buy big-ticket items. That component rose five points to 100.

“With the federal funds rate at its lowest point in many decades, consumers recognize that it is a good time to buy big-ticket items like homes, cars, furniture and appliances,” said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research.

“The problem is that with the declines in the stock market, increased layoffs and record levels of consumer debt, people do not have the money to spend,” he said.

Perceptions of current personal finances fell two points to 86, the lowest level for that component of the survey since December 1996, he said.

Sales of homes and cars have fallen dramatically, despite very low interest rates on mortgages and attractive rebates and cheap financing on cars, McCarty said. Overall retail sales also are down, he said.

Another survey component to decline is consumers’ perceptions of the short-term economy in the United States. That component is down one point in October to 65, the lowest it has been since August 1993.

“During the Gulf War this was the component that was most affected and may be a good indicator of consumers’ overall perception of the success of the War on Terrorism,” McCarty said. “Although that component is certainly affected by other things, when it begins to rise, it will be a good indication that consumers have put the events of Sept. 11 behind them with respect to their buying behavior.”

The center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for October was calculated from 453 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 predicts of buying patterns, consumer confidence tends to be available sooner than those indicators.