UF report: Florida's consumer confidence falls in October

October 25, 2011

GAINESVILLE, Fla. — After a modest gain in September, consumer confidence among Floridians fell a point in October to 63, four points above the record low of 59 set in June 2008, according to a new University of Florida study.

The index used by UF researchers is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest is 150.

“Consumer confidence continues to be in the doldrums, uncomfortably near record low levels here in Florida,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research.

That level of confidence may remain stuck for some time, McCarty said, because “there have been no consistent economic developments over the past couple of months to push confidence lower or raise it from its historically low levels.”

Unlike the previous month, when four of the five indicators used on the survey by UF researchers showed improvement, only two did so in October. The overall view that personal finances are better than they were a year ago rose five points to 54. Expectations that the economy will improve a year from now also increased, rising two points to 55.

Meanwhile, perceptions that personal finances will improve a year from now dropped two points to 72. Respondents also were gloomier than previously about the long-run prospects for the economy; expectations that it will strengthen over the coming five years dropped one point to 67. Finally, the component measuring whether now is good for buying big-ticket items, such as automobiles, laptops, and dishwashers sank four points to 70.

The report found that consumer confidence remains shaky despite reports of slight economic improvement in some sectors. Florida’s unemployment rate, for instance, dropped one-tenth of 1 percent to 10.6 percent, after remaining fixed at 10.7 percent for three months, far better than the record high level of 12.5 percent reached in March 2010.

“One thing to keep an eye on is the size of the labor force,” McCarty said. “Unemployment is the percent of those unemployed but looking for work. When people stop looking, for a variety of reasons, they are not counted. Although Florida’s labor force increased by 14,000 from August to September, it is still down 26,000 from September of 2010.”

Housing prices in Florida also appear to be bottoming out but may be in for more tough times.

“A large overhang of unprocessed foreclosures and a reduction in the maximum loan Fannie Mae and Freddie Mac will finance may put further pressure on housing prices,” McCarty said.

Florida’s sagging consumer confidence, however, does help forecasters assess retail activity in the state.

“Around this time of year we start to think about holiday sales,” said McCarty. “For many retailers this can easily represent 30 to 40 percent of their yearly sales. With consumer confidence low, most retailers are not expecting a strong holiday season in comparison to 2010, which was much better than 2009. The National Retail Federation predicts a 2.8 percent increase this holiday season and relatively flat holiday seasonal hiring. Given the current economy, sales in Florida will probably not exceed that. ”

However, McCarty also suggested that a recent increase in retail sales reported at the national level may indicate that Florida’s own retail activity could receive at least a temporary boost. Uncertainty among consumers, meanwhile, also is likely to continue.

“We must keep in mind that the Super Commission (in Congress) is required to come up with recommendations for budget cuts by Nov. 23 or automatic cuts will be triggered,” McCarty said. “Regardless of the outcome, we can expect renewed media coverage similar to the debt ceiling discussion in August that many consumers found unnerving.”

He also said that even though Florida’s seniors continue to report declining personal finances, this decline should be offset somewhat when they receive a cost-of-living adjustment to Social Security payments in January.

The UF survey measures the mood of consumers 18 or older, living in households, who were randomly telephoned Oct. 1-19. The preliminary index for October was collected from 403 respondents.