UF study: rising gas prices help sink Florida consumer confidence

March 29, 2005

GAINESVILLE, Fla. — Florida’s consumer confidence fell three points to 94 in March, reflecting concerns about rising gas prices despite relatively positive news about healthy employment levels in the state, University of Florida economists report.

The biggest drop came in the component measuring perceptions of the U.S. economy over the next year, which fell eight points to 85, three points lower than at the same time last year. Other declines were recorded in perceptions of U.S. economic conditions over the next five years, which fell three points to 85; perceptions of future finances, which slipped three points to 96; and perceptions of personal finances now compared with a year ago, which dropped two points to 89.

Those declines were balanced by a two-point hike in the component measuring perceptions of whether it is a good time to buy big-ticket items, from 113 to 115.

“Consumers are probably reacting this month to the spike in gasoline prices,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research, where the research was conducted. “Recent economic indicators suggest that employment levels in Florida are pretty good compared to other states, and sales data are positive. However, it is hard not to notice the higher prices at the pump.”

Energy costs will become even more of an issue if prices remain high as the weather gets warmer and people start using their air conditioners, he said.

There was a large difference between low- and high-income households this month in perceptions of U.S. economic conditions over the next year, the component that fell the most, McCarty said. Although households making less than $30,000 a year registered a two-point increase on this component, households making more than $30,000 registered a 13-point decline, he said.

“This sharp decrease is probably due to recent losses in the stock market, which have wiped out gains from February,” he said. “Losses in the stock market would affect higher income households disproportionately than lower income households.”

Barring some unforeseen event, consumer confidence among Floridians should remain in the low 90s, he said.

“We don’t expect big changes in consumer confidence unless there are significant changes in the national economy or policy changes,” McCarty said. “We expect oil prices to remain high, at least for the next several months, and interest rates to rise as the Federal Reserve continues to raise their rates. We also expect employment gains at the present level.”

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 March was conducted 442 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.