UF Survey: Consumer Confidence Up Despite Poor Holiday Retail Sales

Published: December 28 2001

Category:Business, Research

GAINESVILLE, Fla. — Consumer confidence made a modest gain in December despite disappointing holiday retail sales, reflecting optimism about the progress of the war in Afghanistan, University of Florida economists said Thursday.

The preliminary index rose two points to 91 in December, said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research.

“The component measuring consumers’ perceptions of U.S. business conditions over the next year rose 11 points to 82 in December,” he said. “We believe that this component is a bellwether of consumers’ views on the way the U.S. is handling the attack. It suggests that consumers are optimistic about the outcome of the war in Afghanistan and are feeling some sense of closure, albeit a cautious sense of closure.”

This component toppled following the September 11 attack and was the same one that dropped after the Iraqi invasion of Kuwait, he said.

Despite this positive turnaround, two of the survey’s five components fell in December. There was a 9 point drop in perceptions of whether it is a good time to buy major household items. The other drop was noted in perceptions of personal finances now compared to a year ago. That fell two points to 83, its lowest level since December 1996.

“Respondents are increasingly pessimistic about their personal finances now compared to a year ago and do not think now is a good time to buy big ticket items,” McCarty said. “This comes at a time when interest rates are as low as they have been in 40 years and inflation is quite low. Consumer disenchantment with large purchases reflects concerns about job stability and reluctance to take on added consumer debt, which is already at record levels.”

The recession is having a direct effect on consumer purchasing power, and this is translating into lower holiday sales, McCarty said. Early indications are that retail sales for the holiday season will be one of the worst in a decade, he said.

After discounting auto sales, which rose dramatically in October due to huge price cuts, retail sales began to decline going into the holiday season, McCarty said.

When the usual auto pricing resumed, sales returned to normal levels, while vendors of apparel experienced a decline in November after similar discounting in October, McCarty said. Only home furnishing, electronics and appliance sales remain somewhat strong this holiday season, he said.

New data from Telecheck, which tracks spending by the volume of checks written, suggests that halfway into the shopping season sales were up less than two percent over last year, he said.

The center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for December was calculated from 399 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 about personal finance and the economy. Although other economic indicators also predict buying patterns, consumer confidence tends to be available sooner than those indicators.

The index is benchmarked to 1966, so that a value of 100 represents the same level of confidence for that year. The value of the index is in comparing changes over time rather than looking at an isolated month.

Credits

Writer
Cathy Keen, newsdesk@ufl.edu
Source
Chris McCarty

Category:Business, Research

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