UF Survey: Florida Consumer Confidence Stagnant In Cooling Economy

October 26, 2004

GAINESVILLE, Fla. — Florida’s consumer confidence remained unchanged in October, a sign that the economic recovery from the 2001 recession is more sluggish than expected, which could influence voters, University of Florida economists report.

The overall preliminary index remained the same at 93 — two points lower than the same time a year ago — and two of the survey’s five components dropped.

The biggest decline was a four-point drop in the component measuring perceptions of personal finances now compared with a year ago, which fell to 81, one point lower than at the same time a year ago. Perceptions of U.S. business conditions over the next year fell two points to 85, six points lower than the same time last year.

These declines were balanced by a three-point rise in perceptions of buying conditions since last month, but at 105 that is still nine points lower than this time last year, and perceptions of long-term U.S. business conditions, which rose one point to 91. Expectations about personal finances a year from now remained the same at 100.

“Consumer confidence in Florida is definitely cooling compared to its rise earlier in the year,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research. “Although Florida is doing better than the country as a whole, despite the hurricanes, we are beginning to feel the longer-term consequences of high-priced oil and anemic job growth.”

Nationally, consumer confidence, as measured by the University of Michigan using the same questions, dropped sharply in October. In the latest USA Today/CNN/Gallup poll, the economy emerged as the No. 1 issue among registered voters and adults in general, replacing terrorism, although terrorism was still No. 1 among likely voters.

McCarty said he does not know what effect the economy will have on the upcoming election but believes most voters already have made up their minds. “It’s unclear why people are undecided at this point, but it may be they are undecided based on economic issues,” he said. “The fact that national consumer confidence fell a lot is somewhat alarming.”

Although the economy is growing, it is not doing so at the level it has following other recessions, he said.

In Florida, one of the biggest concerns has been the effects of the economy on the elderly, McCarty said. Consumer confidence among Floridians 60 and older fell sharply in June and then again in September, but remained unchanged in October.

“Consumer confidence among the elderly is important because these are people who turn out in great numbers to vote,” he said.

Usually, older people tend to be less confident overall than other groups about future economic conditions, McCarty said. “Because they are on fixed incomes, they don’t respond optimistically about their future incomes improving,” he explained.

Economists attribute much of the recent stagnation in the economy to high oil prices, which affect not only prices at the pump but also the prices of most goods, from food to furniture, he said.

Troubling signs also are apparent in job growth, McCarty said. Although job growth during the first part of the year was promising, jobless claims for the second week in October were higher than expected, and the Bureau of Labor Statistics determined that the increase could not be attributed to the hurricanes alone, he said.

“Many retailers are bracing themselves for a weak holiday season,” McCarty said. “With a colder-than-normal winter predicted by meteorologists and higher fuel prices due to the price of oil and overall demand, many consumers will be forced to make some tough choices. While job growth in Florida has outpaced most other states, consumer confidence is now flat and appears to be declining slightly over time.”

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 427 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 predict buying patterns, consumer confidence tends to be available sooner.

The index is benchmarked to 1966, so 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.