UF Survey: Pessimism Among Seniors Sinks Consumer Confidence Again

May 28, 2002

GAINESVILLE, Fla. — Consumer confidence among Floridians continued to decline in May, fueled by senior citizens who are increasingly pessimistic about the national economy compared with their younger counterparts, University of Florida economists said today.

The preliminary index fell two points to 93 this month, the second decline since a sharp rise in March that likely was due to optimism over favorable changes in the tax code and widespread belief the recession had ended, said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research.

“It is safe to say that the high proportion of seniors in Florida is driving the fall in confidence here in Florida while national confidence is rising,” McCarty said. “We’re in one of those unusual situations where the preliminary University of Michigan index for the nation, which uses the same questions, actually rose while here in Florida we declined.”

He suggests the state’s elderly may be less positive because people over 60 are largely unaffected by the rise in personal income being seen nationally and, because many of them already own homes, current low mortgage rates.

In addition, many older Floridians depend on some form of temporary work to supplement their incomes, and jobless claims are disproportionately high for temporary workers, McCarty said. The continuing rise in the cost of health care also is a factor because it hits seniors on fixed incomes especially hard, he said.

Nationally, consumers’ optimism about their personal finances increased, while here in Florida perceptions of current financial situation compared to that of a year ago remained the same as in April at 82, McCarty said. The reading is down six points from the same time last year, he said.

The component measuring overall perception about future personal finances dropped two points to 101, McCarty said. This descent was driven by respondents over 60 who experienced an average decline of five points compared with a steady rate among younger people, he said.

“This age difference is even more stark in the perceptions of the U.S. economy over the next five years,” he said. “Those over 60 experienced a decline of six points between April and May, while those under 60 experienced a five point increase.”

The only component to rise was the perception about whether it is a good time to buy big-ticket consumer items often bought on credit. That factor rose one point to 104, one point lower than it was a year ago.

McCarty predicts that consumer spending will continue to be slow and will not be the primary engine of growth as the nation recovers from recession.

Chain-store sales were positive in April but weak compared with the same month last year, McCarty said. Much of this could be an aberration because Easter came during April last year, he said.

“While it is only a remote possibility at this point, there is still a chance of a double-dip recession,” McCarty said. This occurs when the economy comes out of a recession but isn’t strong enough to maintain continued positive growth and quickly goes back into one again, he said.

“With inflation virtually non-existent in everything except oil and health-care costs, the Federal Reserve will likely leave interest rates alone for the foreseeable future,” he said.

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 May was conducted from 401 responses. Numbers for prior months are based on about 1,000 responses. The margin of error for the index is 4 percent.

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.