UF Study: Job Growth And Gift Cards Boost Consumer Confidence

January 25, 2005

GAINESVILLE, Fla. — Florida’s consumer confidence rose one point in January, virtually erasing the previous month’s decline, University of Florida economists report.

The overall index edged up from 91 to 92, just one point below the 93 recorded for September, October and November.

The biggest increases came in three components: a four-point gain to 98 in perceptions of future personal finances, a four-point increase to 86 in perceptions of short-term business conditions and a five-point hike to 109 in perceptions of whether it is a good time to buy big-ticket items.

Those increases were balanced by a five-point decline to 82 in perceptions of personal finances now compared with a year ago. Perceptions of long-term business conditions remained unchanged at 87.

“It appears that the consumer confidence reading for December was to some extent an aberration, although there still appears to have been a very substantial drop in perceptions of future finances for Florida seniors,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research, where the research was conducted. “This month’s consumer confidence for Florida rose slightly while the national index as measured by the University of Michigan fell slightly. The volatility in these data is indicative of the mixed signals that consumers are getting about the health of the economy.”

Retail sales picked up at the end of the holiday shopping season, and there are indications that sales of gift cards were robust, McCarty said. Gift cards are counted as sales only after being redeemed, he said.

“What remains to be seen are how retailers fared over the entire holiday season, both in terms of percentage growth of sales and profits,” he said. “Many retailers were discounting deeply starting in early November to increase sales.”

Job data, among the most closely followed economic indicators, also has shown growth, although not as much as many had hoped, McCarty said. Jobless claims data have been particularly volatile recently, reflecting difficulties in adjusting for seasonality, he said.

Consumer confidence remains relatively high, but there appears to be an absence of trends during the past two months, McCarty said.

“With the election over, the president establishing his agenda for the second term and other economic forces, such as the Federal Reserve raising interest rates, Floridians are not sure which way the economy is going,” he said. “In the coming months we should pay special attention to the responses among seniors and low-income households. These are the groups that will be most affected by recent economic news.”

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 439 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.