UF: Florida consumer confidence unchanged in December
GAINESVILLE, Fla. — Consumer sentiment among Floridians was unchanged in December at 77, the same as the revised November reading, according to a new University of Florida survey.
“Much as we expected, the consumer sentiment index remained flat in December,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “It is now apparent that the sharp drop in confidence in October was largely a response to the U.S. government shutdown, and perhaps more importantly, the threat of the U.S. defaulting on its debt.”
According to the December survey, respondents’ overall view that they are better off financially than a year ago fell two points to 67, but their expectations for their financial situations a year from now rose six points, to 80.
Confidence in the nation’s economy over the coming year dropped two points to 74, while trust in its performance over the next five years was unchanged, at 76.
Finally, respondents’ consensus over whether now is a good time to buy a big-ticket item such as a washing machine fell four points, to 88.
Improving economic conditions may be contributing to Florida’s sustained consumer confidence, McCarty said. For example, the Gross Domestic Product, the most basic measure of the U.S. economy, was revised up for the third quarter to 4.13 percent, although three quarters of the growth was due to increased inventories.
The economy is also adding jobs. The Florida unemployment rate declined again in November, down .3 percent to 6.4 percent, which is lower than the U.S. rate of 7 percent. An estimated 2,000 people who left the labor force permanently or stopped looking for work, however, made the Florida unemployment figure look better than it is, McCarty said.
“As the recovery takes hold, we expect the unemployment rate to increase somewhat as some of these discouraged workers start looking for jobs again,” McCarty said.
The housing market is also improving with the median price of a single-family home in Florida increasing $900 from October to November to $169,900 — the first monthly increase since July. Prices are up 13.3 percent from the previous year.
However, residential values may not rise as much in 2014.
“For one thing, those in charge of federal programs that helped to sustain the recovery will use the good economic news as an opportunity to begin backing away from such support,” McCarty said.
The Federal Reserve, for example, will reduce its purchase of treasuries and mortgage-backed securities, which will increase mortgage interest rates. In addition, the FHA plans to lower the cap it will cover for home loans from $729,750 to $625,500. Fannie Mae and Freddie Mac will raise guarantee fees to lenders, which will be passed on to borrowers.
“All of this adds up to additional expenses for buyers,” McCarty said. “While housing price gains thus far are solid and not likely to decline, they will not be the same driver of the recovery as they have been.”
Holiday spending is weaker than last year.
“This is a combination of deep discounting by retailers and a very short holiday season compared to last year due to the lateness of Thanksgiving,” McCarty said. “Retailers’ attempts to capture an extra day by opening on Thanksgiving may have helped, but will not fully counteract the short season.”
McCarty expects consumers to be affected by the rhetoric from Washington surrounding the debt ceiling debate. While there is an agreement to fund the government through 2015, there is not a deal yet to extend the debt ceiling beyond Feb. 7.
Conducted Dec. 1-19, the UF study reflects the responses of 420 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 December survey can be found at http://www.bebr.ufl.edu/cci.