UF Survey: Confidence Soars, Gaining Largest Increase In 11 Years

March 26, 2002

GAINESVILLE, Fla. — Consumer confidence among Floridians experienced its most dramatic increase in more than a decade in March, signaling an end to anxiety over terrorism and the Enron scandal, University of Florida economists said Tuesday.

The preliminary index surged 11 points to 102 in this month, the largest increase in the overall index since March of 1991 when it gained 12 points, said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research.

“This was quite an unexpected change in confidence,” McCarty said. “It appears that consumers in general are recovered from the attacks in September, the war in Afghanistan and the Enron scandal.

The survey measures consumer confidence monthly, using 1966 as the benchmark year.

“Perhaps the most telling result from this month’s survey is the increase in perceptions of personal finances,” he said. “This sudden increase is real evidence that consumers see themselves in a better situation.”

The component gauging consumers’ current personal financial situation gained six points to 86 in March compared to a year ago. This measure had fallen steadily since July.

Consumer confidence now stands at its highest level since November 2000.

All five of the components that make up the index rose this month. The largest gain was in the component measuring expectations about the U.S. economy over the next year, which jumped by 17 points to 103 in March.

Many indicators suggest a perception the recession that officially began about this time a year ago is over and the economy is recovering, McCarty said. Companies are beginning to hire again, inventories in many industries are lower, which will stimulate factory orders, and many companies are anticipating reports of increased profits rather than losses, he said.

“Most forecasts predict a strong showing for the South as compared to other regions of the country,” McCarty said. “Tourism is now expected to pick back up in Florida, as people are confident in the security at airlines and realize that the beaches are still wonderful places to vacation.”

Even the Enron and Arthur Anderson debacles seem to be interpreted as a vote of confidence that the system will be able to make the responsible parties accountable for their actions, he said.

“Perhaps the only note of caution here is that a similar jump in confidence occurred in March of 1991, following the onset of a recession,” McCarty said. “By the end of that year, confidence had again dipped to recession levels as the effects of the recession replaced the euphoria of the successful campaign against Iraq.”

Although the various economic indicators used to measure the health of the economy are more positive now than they were then, there is still some reason for concern, he said.

“How will consumers react when interest rates begin to rise and retailers are no longer offering aggressive discounts?” he said. “Will consumers return to their ‘normal’ buying patterns?”

The center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for March was calculated from 411 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 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.