UF Survey: Consumer Confidence Shows No Typical New-Year Rebound

January 30, 2001

GAINESVILLE, Fla. — For the first time in several years consumer confidence in Florida failed to rebound at the New Year, reflecting concerns about poor company earnings, large layoffs and the Republican fiscal agenda, University of Florida economists said today.

The preliminary index for January registered 95, the same as in December, said Chris McCarty, survey director for UF’s Bureau of Economic and Business Research.

“For the past several years we have seen an increase in consumer confidence between December and January,” McCarty said. “People are usually relieved that the financial burden of the holiday season is over, and that is reflected in optimism about their finances and the economy. This year that is not the case. Consumers are cautious about the health of the economy, and that will probably translate into caution in spending. Don’t look for consumer spending to help us with a soft landing.”

“Consumers are planning to be frugal with their checkbooks and credit cards,” said UF economist Dave Denslow. “Car dealers and department stores will see sales slowing.”

The share of respondents saying now is a good time for major purchases was 63 percent in January, down from 78 percent in September, he said.

Many things may contribute to pessimism among some consumers, McCarty said.

Although the roller-coaster ride on Wall Street now is becoming old news, several large companies have announced poor earnings and massive layoffs, McCarty said. While the economy still is healthy and able to absorb much of this turnover, it may signal consumers that all is not well, he said.

“Just like last month, there is still quite a difference between Democrat and Republican respondents on two components,” he said.

Of Republican respondents, 55 percent think U.S. business conditions will be good during the next year, compared with 32 percent of Democratic respondents, McCarty said. Similarly, 63 percent of Republican respondents think U.S. business conditions will be good during the next five years, compared with 32 percent of Democrats, he said.

“Independents expressed concerns similar to Democratic respondents,” McCarty said. “Over half of those interviewed, among Democrats and Independents, have concerns over the economy. Given the striking differences based on party identification, at least some of this must be insecurity about some effects of the Republican fiscal agenda.”

The bureau conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for January was calculated from 1,015 responses. Numbers for prior months are based on about 1,000 responses. The margin of error for the index is 3 percent.

Consumer confidence is designed to help predict buying patterns by measuring consumers’ mood toward buying. Although other economic indicators also are predictors of buying patterns, consumer confidence tends to be available sooner than those indicators.