UF Study: Strong Job Growth Helps Boost Florida Consumer Confidence

February 22, 2005

GAINESVILLE, Fla. — Florida’s consumer confidence rose three points in February, reflecting the Sunshine State’s strong job growth during the past year and the resiliency of Florida consumers against high energy prices that have plagued consumers in other parts of the country, University of Florida economists report.

The overall index edged up from 93 to 96.

The biggest increases came in three components: a six-point gain to 91 in perceptions of personal finances now compared to a year ago, a six-point increase to 93 in perceptions of the U.S. economy over the next year and a four-point hike to 114 in perception of whether it is a good time to buy major household items.

Those increases were balanced by a one-point decline to 97 in perceptions of future finances and a one-point decline to 87 in perceptions of national economic conditions over the next five years.

“Florida seems to be doing better than most other states,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research, where the research was conducted. “Florida has had the biggest increases in employment over the past year, and at 4.5 percent a lower rate of unemployment than many other states. High energy prices and rising interest rates don’t seem to be putting as much of a drag on the Florida consumer as they have in other areas of the country.”

Despite increases in short-term interest rates by the Federal Reserve, long-term interest rates on mortgages have fallen recently, McCarty said. This has led to some increased activity in the refinancing market, although nothing like the rates of refinancing from a year ago, he said.

“Retail sales nationally have declined recently, although this is almost entirely due to declines in auto sales,” he said. “Florida retail sales, excluding autos, are most likely stronger than the nation as a whole, although the data are not reported by state.”

In contrast to Florida, consumer confidence nationally as measured by the University of Michigan has fallen, although slightly, for the past two months.

Over the past few months, the survey research center also has traced some of the consumer confidence components by age and income groups and found some significant differences, McCarty said.

While there has been some improvement in perceptions of personal finances for both Florida seniors and low-income households, there is still some pessimism about personal finances a year from now, he said.

“It appears that some of the pessimism from previous months that we attributed to discussions about changes to Social Security has reversed,” he said. “There has been sufficient media attention that the initial shock of potential changes has been absorbed. We do expect that most of those at or near retirement will be waiting for more concrete proposals from both the White House and Congress.”

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 February was conducted from 411 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.