UF Survey: Lack Of Jobs Thwarting Florida Consumer Confidence

July 29, 2003

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GAINESVILLE, Fla. — Consumer confidence among Floridians fell in July for the first time in five months, hurt by a continuing lack of jobs, University of Florida economists report.

The preliminary index dropped two points to 91, after rising each month from a low of 79 in February to a high of 93 in June. The source of this month’s decline was primarily in two of the survey’s five components: long term expectations about the U.S. economy, which fell six points to 78, and perceptions of personal finances compared with a year ago, which fell three points to 80.

“Although there are some signs of the beginnings of a recovery, the lack of jobs still remains a major obstacle,” said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research. “Jobless claims have, until very recently, been well over 400,000 each week, a level typically associated with a decline in confidence.”

McCarty said the drop in consumer confidence is in line with what he would expect, given current economic conditions.

“While the large increase from March to April was expected due to the declaration of victory in Iraq, the rise in confidence for May and June has been puzzling,” he said. The index experienced its largest rise this year between March and April, when it rose seven points.

At the same time, other aspects of the economy are more positive, such as a rise in business confidence, which may explain why consumers have, overall, been so optimistic, he said.

The component of the survey measuring expectations of personal finances one year from now increased by three points to 105. No change was reported for two other components; expected national economic conditions over the next year remained at 89, while perceptions of whether the time is right to buy major household items stayed at 106.

“If business confidence returns and companies once again invest in jobs, a recovery would not be far behind,” McCarty said. “Current estimates are that such a turnaround in the job market may not happen until the second quarter of 2004.”

Consumer confidence nationally, as reported by the University of Michigan, is up slightly, McCarty said. The recent differences between what is happening nationally and what is happening in Florida reflect the lack of a real trend in both consumer confidence and the recovery, he said.

Because it is largely dependent on the service sector, Florida’s economy sometimes reacts differently than other states that depend more on manufacturing, McCarty said. However, the lack of jobs is hitting all sectors, and until business investment increases to create more jobs, a steady rise in consumer confidence is unlikely, 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 July was conducted from 460 responses. The error rate is plus or minus 4 percent.

Consumer confidence is designed to help predict buying patterns by measuring consumers’ moods 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.