UF Survey: Florida Consumer Confidence Dips As Election High Fades
GAINESVILLE, Fla. — Florida’s consumer confidence fell sharply in December, suggesting an end to any optimism over the outcome of mid-term elections and renewed concerns about the nation’s economic future, University of Florida economists report.
This month’s consumer confidence index fell four points to 86 after gaining eight points in November, its biggest jump in eight months.
There were substantial declines in three of the five components that make up the index. Floridians’ perceptions of their current personal finances fell four points to 76 after a 10-point increase last month. Increased pessimism among Florida’s seniors led the decline with a six-point drop in the index among those over age 60, while it fell one point among those under 60. Overall, perceptions of U.S. business conditions in the short term fell seven points to 74. Doubts about future economic conditions were apparent with a nine-point drop to 76.
“It appears that the euphoria of the November elections has to some extent worn off in December, and consumers are facing an economy that is at best uncertain,” said Chris McCarty, director of the UF Survey Research Center, which compiles the report. “When retail sales data are available in the middle of January, we still predict that it will show a weak holiday season, certainly no more than 3 percent growth over the previous year. Anecdotal data from some retailers suggests that this may be one of the worst shopping seasons in decades.”
“The winners were big discounters, such as Wal-Mart and Target, although they ultimately suffered disappointing sales as well,” he said. “It remains to be seen if major department stores such as Burdines, Dillard’s, J.C. Penney and Sears fared well or not. Much of the shopping activity was driven by massive sales which ultimately eat into company profits.”
While the United States may not be in a recession or even be heading toward one, the economy is still weak and shows no definitive signs of recovery, McCarty said. Although the third quarter gross domestic product was four percent, it is on a downward trend, and while layoffs have largely abated, hiring in most areas of the country remains anemic, he said.
“The primary thing to watch in 2003 is business confidence and investment,” he said.
At this point, consumers are tapped out, with many having leveraged the equity in their homes, McCarty said. The stock market, however, seems to have found its natural level, with the Dow Jones Average wavering roughly between 8300 and 8900 for the past two months, he said, compared to lows earlier in 2002 of about 7500.
“Barring a prolonged and expensive military engagement in Iraq, business investment should start to recover by July or August,” he said. “One major factor affecting this will be continued reform of corporate accounting laws and the administration efforts to demonstrate that they will not tolerate fraudulent activities.”
The drop in Florida’s consumer confidence contrasts with the findings of the national index recorded by the University of Michigan, which rose 2.5 points to 86.7, McCarty said. This puts the national index and Florida’s 86-point index at roughly the same level, he said.
Since the Florida index was first recorded in 1988, the national index has been higher than the Florida index 62 percent of the time, McCarty said. Since 1995 there has been a trend toward Florida’s index being slightly above the national index, he said.
Generally, both the Florida index produced by the University of Florida and the national index produced by the University of Michigan are highly correlated, McCarty said. Both indexes use the same computation methods and ask the same questions of participants.
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 December was computed from 403 responses. The error rate is plus or minus 5 percent.
Consumer confidence is designed to help predict buying patterns by measuring the mood of consumers toward purchasing. Although other economic indicators also are predictors of buying patterns, consumer confidence tends to be available sooner.
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.