UF Survey: Florida Consumer Confidence Drops Another Four Points

January 28, 2003

GAINESVILLE, Fla. — Florida’s consumer confidence fell sharply in January, reflecting growing uncertainty over the possibility of war with Iraq and lack of confidence in business investment festering from the recent rash of corporate accounting scandals, University of Florida economists report.

This month’s consumer confidence index dropped from 86 to 82, the second four-point drop in two months. Floridians’ perceptions of economic conditions expected over the next year fell nine points to 66, this component’s lowest level since October 2001. Perceptions of business conditions over the next five years fell five points to 73, its lowest level since August 1996.

“These numbers do not bode well for the economic turnaround,” said Chris McCarty, director of the UF Survey Research Center, which compiles the report. “Unless confidence is restored in corporate America, this slow recovery may languish well into 2004.

“Perceptions of U.S. economic conditions are no doubt affected by the uncertainty over the possibility of war with Iraq, and perhaps to a lesser extent by the perception of waning support internationally for military intervention,” he said.

But lack of confidence in business and business investment – not worries about war – provokes the biggest concern about the economy among consumers, McCarty said.

“The fallout from the string of corporate accounting scandals of 2001 and 2002 has not resulted in a clear policy that is convincing to many, particularly consumers with retirement funds,” he said.

While the economy does not appear to be getting much worse, it also is not getting much better, McCarty said.

“The effect of this on the consumer is reflected in the poor holiday shopping season, one of the worst in decades for many retailers,” he said. “If not for brisk auto sales and sales on homes which stimulate purchases of home furnishings and appliances, the retail sales numbers would have been much worse.”

Each of the other three components changed by one point. Perceptions about whether this is a good time to buy major household items fell one point to 102 and expectations about personal finances one year from now fell one point to 97, while perceptions about personal finances now compared to a year ago rose one point to 75.

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 January was conducted from 456 responses. The error rate is plus or minus 3 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.