UF: Florida's consumer confidence remains at near post-recession high
GAINESVILLE, Fla. — Floridians’ consumer confidence remained near a post-recession high in October, according to a monthly University of Florida survey.
“Floridians are still feeling relatively optimistic in October as we head into the final week of the election,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “The index was revised up a point in September to a post-recession high of 80. Our preliminary October reading of 79 is near that high, although in normal times it would be historically low.”
The National Bureau of Economic Research, a nongovernmental entity, determined the recession began in December 2007 and ended in June 2009 — the longest recession since the Depression.
The five survey components that measure overall confidence indicate that Florida’s consumers were both upbeat and concerned in October. For example, their level of confidence in the nation’s economic health over the next year rose three points to 84, “a post-recession high,” McCarty said. In addition, their shared assessment of the U.S. economy over next five years rose one point to 85.
The survey, however, also showed that confidence in personal finances compared with a year ago fell three points to 61. Meanwhile, Floridians’ expectations of being better off financially a year from now fell two points to 84.
Respondents also were pessimistic as to whether it is a good time to buy a major household appliance, with a five-point drop to 80.
McCarty attributes the increased pessimism over personal finances to coverage of the presidential debates and perhaps some awareness of the set of automatic federal budget cuts and tax increases — the so-called “fiscal cliff.”
Floridians’ ambivalence over the economy may also “be tied to the elections and their mood may change following the elections given that the state appears evenly divided between the two presidential candidates,” McCarty said. “One candidate will lose, and this fact may change the outlook of those supporting him,” he added.
Meanwhile, the economy is clearly in recovery, he said.
Several indicators are positive both in Florida and the nation. New home sales are up and the median price of existing homes, though down slightly from August, is up 7.8 percent from the previous year. In addition, the Federal Reserve’s recent stimulus, which ensures relatively low mortgage rates through next year, will continue to support an improving housing market.
“Several property tax amendments on the Florida November ballot may also stimulate sales,” McCarty said, “although it is unlikely that many potential homebuyers are holding out for these changes given the favorable conditions for buying a home.”
The volatile stock market, meanwhile, has kept most of its gains for the past year. In addition, U.S. economic growth as measured by gross domestic product for the third quarter is higher than expected. Finally, the U.S unemployment rate dropped to 7.8 percent, while Florida’s unemployment fell .1 percent in September to 8.7 percent. “While some of this is due to a decline in the labor force, some jobs are being created,” and we have almost certainly turned the corner in terms of job losses,” he said.
Such promising trends could mean that the next phase of the recovery is a return to normal economic conditions, he said. However, he cautioned that long- term structural change to the U.S. economy caused by macro-economic forces may have redefined what “normal” means.
Prior to the recession, for instance, the natural unemployment level of workers looking for jobs was between 5 and 5.5 percent. The new normal unemployment rate, however, “may now be closer to 6 percent,” McCarty said.
Economic perils also loom ahead.
“As we have pointed out in previous releases,” McCarty said, “the recovery could be derailed if the impending fiscal cliff is not addressed in a sensible and coordinated way. Congress will have less than two months following the elections to modify the impact.”
Lawmakers are expected to extend the Bush tax cuts, while letting others, such as the payroll tax cut, expire. Automatic budget cuts brokered in August 2011, known as sequestration, will likely be delayed, too.
“If Congress and the White House cannot agree on a solution” McCarty said, “the full impact of the fiscal cliff will almost certainly result in a recession at a time when the country and Florida are recovering from the biggest recession in history.”
Conducted Oct. 12 -25, the UF study reflects the responses of 412 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 October survey can be found at http://www.bebr.ufl.edu/cci.