UF Economists: Consumer Confidence Remains Unshaken In August

August 26, 1997

GAINESVILLE — Florida’s consumer confidence index remained unshaken in August, as optimism overcame any effects from the United Parcel Service strike and roller coaster vacillations in the stock market, University of Florida economists report.

The preliminary consumer confidence index for the month held at 100, the same level as July, when it reached an eight-year high, said economists with UF’s Bureau of Economic and Business Research, which conducts the survey.

“The pattern among Floridians is similar to what has been happening with consumer confidence nationally, although there are signs of a downturn nationally,” said Chris McCarty, the bureau’s survey director. “Optimism about the economy and personal finances has been on the increase across the country and in Florida since hitting a one-year low around the Christmas holidays.”

Currently, consumer confidence parallels what is by most measures a strong U.S. economy, in which inflation and interest rates are low and employment levels are high, McCarty said. Home sales have risen steadily, retail sales have improved over the second quarter and auto sales recently have picked up again after showing signs of weakness for months, he said.

“During the past months, there were a couple of events that could have affected consumer confidence but didn’t,” said UF economist Dave Denslow. “The stock market has been up and down, and the UPS strike had the potential to affect confidence among blue-collar workers. Neither seemed to have had much effect, as confidence remained unchanged all around.”

Unlike the Gulf War or the 1987 near-crash of the stock market, events such as the UPS strike and current fluctuations in the stock market are not unusual enough to affect people’s perceptions about their financial condition or their expectations about the future, McCarty said.

On the negative side, consumer debt still is at record highs and bankruptcies are on the upswing, McCarty said. When the economy eventually recedes, as it inevitably will, consumers who are just making ends meet in a favorable economic climate may be forced into bankruptcy, he said.

Loss of consumer confidence often is interpreted as a leading sign of economic downturns because it predicts consumer buying behavior, McCarty said. Consumer spending makes up about two-thirds of all domestic economic activity in the United States, and when consumers limit spending, this affects sales and, ultimately, profits and levels of employment, he said.

Regionally, the largest change was in southeast Florida, where confidence fell three points to 96 in August. The decline was driven by a six-point drop in perceptions of future finances and whether it is a good time to buy big-ticket items.

Confidence in the other three regions remained largely unchanged. Overall confidence in the central and northern regions tended to be higher than in southwest and southeast Florida, probably because of the larger share of consumers over age 60 in South Florida, McCarty said. Older consumers tend to be less confident than their younger counterparts, he said.

Employed Floridians gave pessimistic reports of business activity. Only 47 percent — down 5 percent from July — said business activity was better than at the same time a year ago. The share who expected extra employees to be hired at their workplace in the next six months fell from 37 percent in July to 33 percent in August.

The Florida Consumer Attitude Survey is conducted monthly by the bureau. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for August was calculated from 895 responses. Numbers for prior months are based on about 1,000 responses.

The margin of error for the statewide index is almost 2.5 points, while that for the regions is higher, ranging between four and eight points. Estimates for the north and central regions have the largest margin of error due to smaller sample sizes.