UF survey: Florida consumer confidence faced problems before war

March 25, 2003

GAINESVILLE, Fla. — Florida’s consumer confidence edged up one point in March, but the overall index value remained relatively unchanged since last month when it sank to its lowest level in more than a decade, University of Florida economists report.

“The war in Iraq has certainly had some effect on consumer confidence and the economy in general,” said Chris McCarty, director of the UF Survey Research Center, which compiles the report. “However, many of the problems we are facing now were here prior to the war.”

In February, the overall index dropped from 83 to 79, its lowest reading since November 1992. This month it rose one point to 80 as a result of a moderate shifting of values among the five components that make up the index.

The two components measuring perceptions of personal finances each rose: the one gauging current finances by four points, to 82, and the one assessing personal finances in the future by three points, to 98. The component measuring expectations about the economy over the next year also rose by two points to 61.

Balancing these gains was a fall in expectations about business conditions over the next five years, which fell four points to 70, its lowest level since June 1996. Also, perceptions about whether it is a good time to buy big-ticket items fell a point to 91, its lowest level since November 1992.

“The overall index value is relatively unchanged since last month,” McCarty said. “At 80, the index is still somewhat low and could easily go lower in the coming months.”

It is encouraging that a higher percentage of consumers are optimistic about their personal finances, McCarty said. This was particularly true among lower-income households making less than $30,000 a year, he said.

“However, the overall change of one point still indicates that consumers are uncertain about the economy and are not likely to raise their spending levels any time soon,” he said.

Retail sales as measured by the U.S. Bureau of the Census fell in February by 1.6 percent and were hit hard by a large decline in auto sales of 3.4 percent, McCarty said. Sales of building materials fell by 7.5 percent, likely a result of the harsh winter storms in February, he said.

Meanwhile, the number of consumers filing for unemployment increased in March and is now reaching levels consistent with a double-dip recession, which occurs when the economy comes out of a recession but isn’t strong enough to maintain continued positive growth and quickly goes back into one, McCarty said. While personal income growth remains strong, there are signs that it may weaken, he said.

“The U.S. economy is having a difficult time starting a turnaround from the recession during the first quarter of 2001,” he said. “It is now two years since that recession, and we have not made significant progress toward a recovery.”

The research center conducts the Florida Consumer Attitude survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for March was conducted from 418 responses. The error rate is plus or minus 5 percent.

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

The index is benchmarked to 1966, so that a value of 100 represents the same level of confidence for that year. The value of the index is in comparing changes over time rather than looking at an isolated month.