UF survey: economic turnaround boosts Florida consumer confidence

January 27, 2004

GAINESVILLE, Fla. — For the second month in a row, consumer confidence among Floridians climbed two points, the result of a rebounding stock market, falling unemployment claims and robust holiday sales, University of Florida economists report.

The preliminary index rose to 98 in January, its highest level in 22 months. That’s good news for the Bush administration in an election year, said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research.

“Consumers are definitely seeing a turnaround in the economy,” McCarty said. “The last time confidence in Florida was this high was in March of 2002. Excluding that month, this is the highest confidence has been since before the recession,” which began during the first quarter of 2001, he said. Consumer confidence in March 2002 was 102.

The sources of this month’s gain were broad-based, with four of the five components experiencing increases. The largest gain was in the component measuring perceptions of long-term economic conditions in the United States, which rose five points to 94, which is 21 points higher than a year ago.

Optimism about short-term economic conditions in the United States rose two points from December to 99. Expectations about personal finances a year from now rose two points to 103, and beliefs about whether this is a good time to buy major household items rose two points to 109. The component measuring assessment of personal finances now compared with a year ago remained at 85.

For many consumers there is reason to be confident, McCarty said. Low interest rates and a lack of inflation make it a good time to buy for those who can afford it. Housing purchases have been fueled by recent declines in mortgage rates, although refinancing has cooled significantly, he said.

“Jobless claims are down, suggesting that layoffs have abated and there are signs of rehiring,” he said. “And the stock market is getting closer to pre-dot-com crash levels, reflecting increased confidence among businesses as well.”

In addition, retail sales for the 2003 holiday season were up 6.7 percent over the previous year, although this was not unexpected because retail sales were up only 4.3 percent in 2002 and 3.8 percent in 2001, he said.

On the negative side, consumer debt and filings for bankruptcies are at record highs despite low interest rates, tax rebates and infusions of cash from home refinancings, McCarty said. And while new unemployment claims are much lower – dropping from 405,000 at the end of September to 341,000 in mid January – net job creation is still a problem, he said.

Going into the election season, rising consumer confidence in Florida is good for President Bush’s re-election bid, McCarty said.

“High levels of consumer confidence among Floridians will have a heavy impact on the elections,” he said. “Florida ranks fourth in terms of electoral votes and will no doubt be a key state in the upcoming elections. Having happy consumers who feel good about their finances will be an important issue.”

In the January survey, however, confidence among Floridians age 60 and older declined, while it rose among younger Floridians, McCarty said.

“Given that seniors vote in higher proportions than their younger counterparts, this will also be an issue,” 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 January was conducted from 417 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.