UF Survey: Consumer Confidence Drop Calls Recovery Into Question

April 30, 2002

GAINESVILLE, Fla. — Consumer confidence among Floridians declined in April after its most dramatic increase in more than a decade last month, underscoring the fact that signs of an economic turnaround remain unclear, University of Florida economists said today.

The preliminary index fell eight points to 94 this month, said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research.

“More surprising than this month’s fall in confidence was last month’s rise,” McCarty said. “There seemed to be little tangible evidence of a true turnaround in the economy to justify the optimism of Florida consumers. Most economists describe the indicators so far as murky, some indicating we are coming out of recession and others suggesting we have yet to come out of the woods.”

All five components of the index lost ground in April, just as they increased between February and March. The largest drop was in the component measuring whether it is a good time to buy expensive consumer items. That component fell 14 points to 101 in April.

“On the positive side, jobless claims are down, indicating that people are becoming employed again, and the gross domestic product has certainly increased,” McCarty said. “On the negative side are some fairly pessimistic earning reports, many due to attempts to correct reporting practices following the Enron scandal. Recent reports from the Association of Realtors suggest that sales of both new and existing homes are down, despite very low interest rates.”

In many ways, the numbers have returned to their levels for February. However, expectation about the state of the nation’s economy over the next year is down five points from last month to 97, but is 11 points higher than it was in February.

Perceptions as to whether it is a good time to buy big-ticket items is now 101, three points lower than February. In March, it was 115.

“This last component is disturbing because a fall may indicate that consumers are not likely to continue their pace of spending,” McCarty said. “With interest rates still low and many deals still out there in the retail markets, such a change does not bode well for the trends when interest rates do rise.”

The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for April was calculated from 434 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.