Rise In Consumer Confidence Suggests Improved Holiday Sales

October 28, 2003

GAINESVILLE, Fla. — Consumer confidence among Floridians rose four points this month, suggesting the holiday shopping season will be better for retailers than previous measures indicated, University of Florida economists say.

The preliminary index increased to 95, fueled by large hikes in two of the five components, said survey Director Chris McCarty. The component measuring perceptions of whether it is a good time to buy big-ticket items, such as furniture and appliances, rose 14 points to 114 after a six-point fall in September. The other component showing a dramatic rise involved consumers’ perceptions of short-term national economic conditions, which increased eight points to 93.

“Given these recent numbers, we may have to revise our predictions about holiday sales,” McCarty said. “Particularly when we are comparing sales this year to a weak holiday season last year, the recent rise in confidence here in Florida may result in an increase of 5 percent or more.”

Much of this will depend on whether the funds for recent spending – fueled by tax rebate checks and mortgage refinancing – can continue, McCarty said. Data on mortgage applications shows that refinancing has declined sharply since interest rates rose, he said.

Last month, survey officials warned of the possibility of a lackluster holiday retail season after a sharp drop in perceptions about whether it was a good time to buy big-ticket items.

“Coupled with the large increase in perceptions of the economy over the next year, it seems consumers in Florida are increasingly convinced the recovery is on its way,” McCarty said. “There is some reason to believe that is the case, given some economic data. Florida in particular seems to be recovering more quickly than many other states, given that it doesn’t depend much on manufacturing.”

Results for three of the five other survey components were mixed. Perceptions of personal finances now compared with a year ago fell three points to 81. The remaining two components each rose by one point: personal financial situation expected one year from now to 102 and expected national economic conditions over the next five years to 85.

“These are some perplexing results,” McCarty said. “Perceptions about whether it is a good time to buy items that are often discretionary and often require credit has been somewhat volatile lately. It was unchanged in June through August, fell for a month then more than made up for that loss in October. It’s difficult to tell what’s on the mind of consumers.”

National consumer confidence as measured by the University of Michigan was up slightly in their mid-month study, he said.

Recent reports on jobless claims have been encouraging, suggesting that layoffs have largely abated and there is some rehiring, although this growth is largely dependent on temporary jobs, McCarty said. Continuing claims also have fallen recently, although there is debate whether this is due to the creation of new jobs or simply that those making claims have run out of benefits, 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 October was conducted from 453 responses. The error rate is plus or minus about 5 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.