UF: Florida consumer confidence hits five-year high
GAINESVILLE, Fla. — Florida’s September consumer confidence reached a post-recession high of 79 — up three points from a revised August reading of 76, according to a monthly University of Florida survey.
“The last time Florida consumer confidence hit 79 was in October 2007,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “At that time, confidence was on its way down as the housing crisis was getting under way. This month’s index comes at a time when the economy is still in recovery.”
The September survey showed increases in all five components that researchers use to assess the collective economic opinion of Floridians.
According to September’s findings, the component measuring respondents’ overall view of whether they think they are better off economically today compared to a year ago rose one point to 62. In addition, their expectations that personal finances will improve a year from now rose one point to 86. Meanwhile, survey takers’ overall faith in the U.S. economy over the next year rose three points to 78. They are also optimistic about the nation’s economic health over the next five years. That figure went up two points to 84. Finally, Floridians’ assessment that the present is a good time to buy big-ticket items, such as automobiles and refrigerators, rose two points to 82.
Despite this uptick in optimism, several economic conditions serve as a drag to Florida’s recovery. For one thing, job losses in construction and government helped keep the state’s unemployment rate in August unchanged from the previous month at 8.8 percent. Normal unemployment levels range from 5.5 to 6 percent.
“August also saw a decline of 10,000 people in the labor force,” said McCarty. Many of these individuals are discouraged workers who have abandoned their search for employment. This parallels a national trend.
Meanwhile, gas prices remain high, and McCarty expects them to rise over the long term. Demand will pick up as the recovery takes hold, especially from China and other Asian countries.
“Although inflation is currently under control,” he said, “consumers should expect increases in prices next year, as the effects of the drought hitting much of the U.S. make their way into food prices.”
However, there is good economic news for Florida.
The median price for a single-family home in August was up 5.8 percent over the previous year’s average at $147,000 although it was down slightly from July’s figure.
“The stock market is getting closer to the all-time record and this, along with increases in housing prices, are certainly a boost to consumers’ sense of wealth,” McCarty said.
Meanwhile, a recent decision by the Federal Reserve to guarantee low interest rates until at least 2015 may prove to be “a two-edged sword” for the economy, McCarty said. “While this action will stimulate consumption, particularly in the housing market, it will also make it difficult for people who are approaching retirement and typically put assets into interest-bearing accounts, which are considered safer than investments, such as the stock market. Seniors may have to change their investment strategies to keep up with inflation next year.”
October should prove an interesting month for consumer confidence, McCarty said.
“The presidential debate on Oct. 3 will focus on domestic policy and will almost certainly include a direct question about the ‘fiscal cliff’ in January. Those Floridians who are still not aware of the potential effects of the looming cuts and tax increases will certainly know about them after the debate.”
Political ideology, which already plays a significant role in consumer confidence, could also become even more crucial as the presidential campaign heats up. Research shows stark differences between Obama and Romney supporters concerning confidence in the economy, McCarty said.
“Obama supporters have much higher confidence than Romney supporters,” he said. “Whether Floridians react negatively or positively remains to be seen, but it will largely determine consumer confidence as we get close to the holiday shopping season.”
Conducted Sept. 12-20, the UF study reflects the responses of 419 individuals who represent a demographic cross-section of Florida.
The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest is 150.
Details of the September survey can be found at http://www.bebr.ufl.edu/cci.