UF: Florida's consumer confidence drops three points in July
GAINESVILLE, Fla. — Consumer confidence among Floridians sank three points in July to 78 from a revised reading of 81, after edging upward for four consecutive months, according to a University of Florida survey.
“We were surprised by this sudden decline,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “Consumer confidence at the national level as measured by the University of Michigan actually rose slightly in July to 85.1. This raises questions as to what is happening that led to Florida’s decline.”
Four of the five components measured in the index decreased. Overall perceptions among respondents that they now are better off financially than they were a year ago fell three points to 66. Meanwhile, their expectations of better personal finances a year from now dropped six points to 76.
Confidence in the U.S. economy over the coming year fell three points to 79, while their faith in the nation’s economic health over the next five years fell seven points to 75.
Only one survey component went up. The consensus that now is a good time to buy big-ticket items, such as a new car, rose four points to 96, the highest level since April 2007.
July’s slip in confidence is at odds with relatively good economic news for the state. Age of the respondents may explain why.
“The drop in confidence seems to be driven by pessimism among younger respondents with lower incomes,“ McCarty said. “This age group reports not only lower current personal finances now compared to a year ago, but their expectations of lower personal finances a year from now fell too, dramatically dropping from 101 to 87 for those under 60 and from 82 to 68 for those with incomes under $30,000.”
“Economists have pointed out that young people are disproportionately being left behind in the economic recovery,” McCarty added. Florida’s unemployment rate, for example, has remained steady since June at 7.1 percent, which is less than the national unemployment figure of 7.6
“But unemployment is higher for younger Americans,” he said. “In June it was 13.5 percent for those 20-24, and 22.6 percent for those 18-19. “If you consider broader measures of unemployment, such as those who are under-employed, the situation is worse.”
Although most areas of Florida’s economy grew in July, there were declines in the leisure and hospitality industry. “These jobs disproportionately employ low-income and younger Floridians,” McCarty said.
Housing price increases and record highs in the stock market may help better off and older Floridians but they provide less benefit to younger Floridians. “Increased housing prices and rising interest rates could, in fact, be a barrier to younger and low-income Floridians buying a house,” McCarty said.
“Another possibility is that these are early signs of the negative effects of sequestration, something many economists have been expecting,” McCarty said. “There are many ways the automatic cutbacks at the federal level can trickle down to the state level.”
Among them are dramatic funding cuts for Head Start, a program that low-income parents rely on for education and meals for their children. Some families depend on the funding for summer programs that allow them to work during summer when most public schools are closed.
“The big question,” McCarty said, “is whether the decline in confidence turns out to be an outlier or whether we will see a trend down in the next few months.”
Conducted June 13-25, the UF study reflects the responses of 411 individuals, representing 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 July survey can be found at http://www.bebr.ufl.edu/cci.