Florida Consumer Confidence Still Rebounding, UF Survey Shows

May 27, 2003

GAINESVILLE, Fla. — Consumer confidence among Floridians rose moderately in May, the second month in a row to reflect optimism over the end of war in Iraq, University of Florida economists report.

The preliminary index rose three points to 91 in May, said Chris McCarty, director of UF’s survey research center at the Bureau of Economic and Business Research. In April, it rose seven points to 88.

“Consumers have definitely shaken off any pessimism due to the war or the threat of terrorism, at least in terms of their outlook on the economy,” McCarty said.

The largest gain was in perceptions of personal finances, which rose seven points to 84. Beliefs about long-term business conditions rose six points to 92, and short-term business conditions rose four points to 85. Views on whether it is a good time to buy big-ticket items rose three points to 100. The only component to fall was the one gauging consumers’ perceptions of their personal finances a year from now, which fell three points to 96.

“I expected confidence to rise last month, given the successful outcome of the war in Iraq,” McCarty said. “However, I am somewhat surprised that confidence continues to rise, given relative weakness in other areas of the economy.”

Lack of jobs continues to be the major obstacle on the road to recovery, McCarty said. First-time claims for unemployment insurance remain well above 400,000 a week, a level consistent with a contracting labor market, he said.

Companies have not yet rehired from massive layoffs in 2000 and 2001, McCarty said. In fact, many companies continue to lay off workers to increase profits, he said.

“Until the trend turns to hiring, the economy remains in danger of recession,” he said.

Retail sales fell much more than expected in April, although consumers responded to new promotions for auto sales, he said.

On the positive side, orders were up both for defense and civilian durable goods, McCarty said, and the average 30-year mortgage rate is approaching 5 percent, he said.

“A new round of refinancing, given recent drops in mortgage rates, continues to increase the bottom line of consumers,” he said.

Those who still have jobs are enjoying cheap goods and opportunities to get some of the lowest mortgage rates ever, McCarty said.

“A confident consumer who is willing to spend is certainly vital to the recovery at this point,” he said.

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 May was conducted from 391 responses. The error rate is plus or minus 4 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.