Florida's December consumer confidence continues upward trend
Consumer sentiment among Floridians continued its steady rise to reach a post-recession high in December of 87.4, the highest level since February 2007, according to a monthly University of Florida survey.
“We had expected this slight increase in consumer sentiment,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research, or BEBR. ”With the mid-term elections behind us, the passage of a federal budget and an improving economic climate in Florida, consumers are more optimistic.”
Four of the five components composing the index increased while one decreased. “Three of the five were at post-recession highs,” McCarty said.
Survey-takers’ overall judgment that their personal finances are better now than they were a year ago fell 3.5 points to 72.5. However, they are optimistic about the future. Their expectation for doing better financially a year from now rose four points to 86.
Respondents also have confidence in U.S. economic conditions. Their faith in the national economy for the next year went up 1.3 points to 87.3, while their expectations for its performance over the next five years rose 1.8 points to 86.8.
They also expressed a 3.4-point rise in confidence to 104.4 when asked whether now is a good time to buy a big-ticket item, such as a washing machine.
Good news about jobs is fueling some of the current optimism. The state’s employment situation improved again in November with a decline of two-tenths of a percent in unemployment, which now stands at 5.8 percent, matching the U.S. unemployment figure. This drop is significant “since most economists consider the natural level of unemployment between 4 and 5 percent,” McCarty said.
“The labor force grew marginally by 1,000, and labor force participation remained at historically low level of 60.5 percent,” McCarty said. “Many economists are puzzled by the low participation rate, given the recovery and the massive monetary intervention on the part of the Federal Reserve. One driver of this is Baby Boomers retiring, sometimes early. The question is, how many workers will re-enter the workforce one the economy takes off?”
The economic sector in Florida showing the most growth in new jobs is trade, transportation and utilities -- a broad category that includes retail trade. This category has increased, as has leisure and hospitality, replacing construction and manufacturing jobs lost during the recession.
Florida’s housing market, meanwhile, has remained stable with the median price for a single-family home falling by $1,000 to $176,000. Home mortgage rates are relatively unchanged with the 30-year rate hovering around 4 percent.
Stock market prices, after declining in the middle of December, climbed by the end of the month with the Dow hitting 18,000 for the first time. Another main driver of the rise in confidence is the continued decline in gas prices, which have fallen to an average of $2.56 a gallon across Florida, a drop of nearly 25 cents in a month.
“For many Floridians this represents an enormous savings,” McCarty said.
UF’s BEBR economists expect a modest rise in consumer sentiment and a favorable economy will help boost holiday sales.
“So far, the data seem to suggest that holiday sales will surpass last year’s,” McCarty said, “but perhaps not by the 4.1 percent forecast by the National Retail Federation.”
McCarty noted that calculations for the economic impact of the holiday season include data from the entire month of December to factor in pre- and post-holiday sales. The key question is whether Florida’s newfound optimism will carry over into the New Year.
“There is reason to believe it will, at least until mid-year,” McCarty said. “The recent release of national consumer sentiment from the University of Michigan unexpectedly rose to 93.6, more than six points higher than Florida. Meanwhile, U.S. GDP for the third quarter rose 5 percent in large part due to a rise in personal consumption. This should carry over into Florida consumer sentiment next month. The main drag on consumer sentiment is the prospect of a Federal Reserve rate hike mid-year, which seems increasingly likely given the recent positive economic reports.”
Conducted Dec. 1-21, the UF study reflects the responses of 426 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.
Writer: John Dunn, firstname.lastname@example.org