Florida's consumer confidence remains virtually unchanged in April

April 24, 2007

GAINESVILLE, Fla. — Pessimism about the housing downturn and rising gas prices balanced by optimism about a strong stock market caused consumer confidence in Florida to remain steady in April at 86 after falling six points in March, a new University of Florida study finds.

There were no large changes in the five components that make up the index, indicating virtually the same mood among consumers as last month, said Chris McCarty, director of the Survey Research Center at UF’s Bureau of Economic and Business Research, which conducts the survey.

The largest gain was in the component measuring expectations about personal finances a year from now, which rose two points to 92. Two components rose one point, perceptions of personal finances now compared with a year ago to 81 and perceptions of U.S. economic conditions over the next year to 79. Two components fell; perceptions of U.S. economic conditions five years from now, which fell two points to 79, and perceptions of whether it is a good time to buy big-ticket items, which slipped one point to 98.

“Florida consumers are in a holding pattern regarding the economy and how it affects them,” McCarty said. “Gas prices in Florida have risen over 20 cents a gallon this month, coming on the heels of steep increases between February and March. Over the past two years these increases have typically led to a fall in confidence. Adding to that the growing problems with housing sales and falling house prices in Florida, consumers have plenty of reason to be pessimistic.”

On the positive side, the stock market has been strong in April, a boon to optimism among middle- and upper-income households, he said.

The economic indicators used to gauge the direction of the economy remain mixed, McCarty said.

“There is still no clear indication that the decline in home sales and construction has significantly affected other areas of the economy nationally or here in Florida,” he said.
“Employment and income growth remain strong and is so far balancing the effects of the downturn in housing.”

In addition, there has been no major downturn in retail sales so far, although when gasoline sales are excluded, growth is relatively anemic, McCarty said.

Most economists do not expect a recession as a result of the housing downturn, although growing numbers see far more negative consequences than was the case in the fourth quarter of 2006 when many declared the worst had passed, he said.

“We still believe that the effects of the downturn in housing here in Florida are far from over,” McCarty said. “We have been expecting a very large effect on consumers for over a year now. It just took a lot longer than anyone expected. Our prediction is still that the stalled housing market and the effect it has on home equity will have far-reaching effects that will extend to the retail sector.”

Ultimately, much of the vast inventory of homes and condominiums will be sold, but not until prices decline a bit further in some markets, he said.

A part of the housing story that remains unaddressed is how potential buyers will decide whether someone is a trustworthy broker when the housing market picks up again, McCarty said.

“While Congress is busy legislating controls, there has been little or not attention paid to the plight of the potential buyer who has lost confidence in what was always considered a very trustworthy system,” he said.

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 April was conducted from 416 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 the year. The value of the index is in comparing changes over time rather than looking at an isolated month.