UF survey: Dip in gas prices causes rise in Florida consumer confidence

November 29, 2005

GAINESVILLE, Fla. — Optimism about falling gas prices caused Florida’s consumer confidence in November to rebound, rising four points to 84, University of Florida economists report.

The biggest gain was a 10-point increase in perceptions of buying conditions, which rose to 98. Perceptions of short-term U.S. business conditions rose six points to 72; perceptions of personal finances now compared with a year ago rose two points to 81; and expectations about personal finances a year from now rose one point to 91. Perceptions of long-term business conditions remained unchanged at 76.

“The rise in consumer confidence in November came as somewhat of a surprise,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research. “The rise appears to be due to the recent declines in gasoline prices, which have fallen steadily since the beginning of October.”

Although a decline in gas prices is typical following the Labor Day weekend, this second decline has been caused by a combination of increased supply from refineries that were damaged by Hurricane Katrina, lower crude oil prices worldwide and reduced demand from American consumers, some of whom have adjusted their fuel consumption after record prices this summer, McCarty said. But fuel prices are expected to edge higher as cooler weather once again raises demand, he said.

“Lower gasoline prices and rising consumer confidence come just in time for retailers who are gearing up for the holiday shopping season,” McCarty said.

Recent estimates of retail sales have been positive, with sales, excluding autos and gasoline, up 1.1 percent over the previous month, he said.

“This bodes well for Florida retailers who may have a better holiday shopping season than was originally anticipated,” he said. “Nationally, the situation may be much different, though, as cold weather sets in and still high energy prices force consumers to choose between heat and gift giving.”

Some negative influences are looming that could hurt buying plans, McCarty said. Highest on the list are rising interest rates, which have severely impacted refinancing and home equity rates, he said.

“Recent holiday shopping seasons have been in no small part fueled by home equity loans and lines of credit,” he said. “Far fewer consumers have that as a resource this year compared to last year.”

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 November was conducted from 447 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.