Economic effects of oil spill cut Florida's consumer confidence

June 29, 2010

GAINESVILLE, Fla. — The impact of the gulf oil spill combined with the lingering overall economic malaise has Floridians feeling much worse off than they did a year ago, according to a new University of Florida survey.

Consumer confidence fell three points in June to 67, but the biggest decline of all components in the survey was in perceptions of personal finances now compared with a year ago. That measure fell nine points to 45. Perceptions of personal finances one year from now fell four points to 75.

“We had expected consumer confidence to decline due to the effects of the oil spill,” said Chris McCarty, survey director of the Bureau of Economic and Business Research. “What we did not expect was the main effect to be in the components measuring perceptions of personal finances both now and in the future.”

The personal finance questions tend to be much less volatile than those looking at national trends and reflect real effects on consumers that tend not to rebound quickly.

“The decline in the personal finance questions suggests that on top of the weak recovery, the oil spill has caused some real economic pain, such as through jobs related to tourism and perceptions of lower property values,” he said. “We don’t expect this decline in perceptions of personal finances to turn around quickly.”

Perceptions of U.S. economic conditions over the next year fell two points to 64, while perceptions of U.S. economic conditions over the next five years fell two points to 70. Perceptions as to whether it is a good time to buy big-ticket items that often require credit or loans fell one point to 79.

Overall economic news for Floridians has been mixed, McCarty said. Prior to the oil spill, housing sales had been fairly strong and prices for lower-priced homes appeared to have hit a bottom. Home sales, particularly of new homes slipped dramatically as the tax rebates ended in April.

Unemployment in Florida registered its second straight decline of 0.3 percent and is now 11.7 percent. This is still historically high, and many of the declines are likely due to temporary Census hires which will disappear after June, he added.

“The economic effects of the oil spill are only now starting to show up in the data, although they have been known to residents and businesses along Florida’s west coast for nearly two months,” McCarty said. “It is likely that sales tax revenues, already down from the recession, will decline further as tourists put off trips. This will inevitably translate to a budget deficit in next year’s legislative session, which promises to be more difficult that the one that just ended.”

McCarty predicted recent losses in consumer confidence are unlikely to regain until the leaking oil is stopped and the spill’s short- and long-term effects are known. “We should expect confidence, and therefore retail sales, to be anemic through the summer and perhaps well into the fall,” 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 June was collected from 435 responses.