Floridians slightly more confident amid improved economy

July 27, 2004

GAINESVILLE, Fla. — Consumer confidence among Floridians edged up in July, driven by rising incomes, a stable job market and a recent boom in mortgage applications resulting from lower rates, University of Florida economists report.

The overall preliminary index gained one point to 96, and three of the survey’s five indexes also rose.

The biggest increase was in the component measuring expectations about the U.S. economy over the next five years, which rose seven points to 95. Measures of perceptions about the U.S. economy over the next year rose five points to 93, while views about whether it is a good time to buy big-ticket items rose one point to 110.

Two components declined. Perceptions about personal finances a year from now dropped nine points to 95, and perceptions about personal finances now compared with a year ago fell one point to 85.

“Overall, consumers in Florida appear quite optimistic, but the results of the survey this month are somewhat contradictory,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research. “On the one hand, consumers expect their personal finances to decline over the next year, but at the same time they are quite optimistic about the U.S. economy, particularly over the next five years.”

Last month’s measure of personal finances may have been abnormally high and may now be returning to its pre-June trend, he said.

Floridians 60 and older showed the biggest contrast in terms of their assessment of their personal finances compared with their expectations about the economy, McCarty said.

“Confidence among Florida seniors rose a point to 87, but it is still four points below what it was in May,” he said. “We’re not sure what is driving this, but this month they are certainly more optimistic about future economic conditions than they were last month, although they are pessimistic about their personal finances. These numbers will no doubt come into play as we get closer to the presidential election in November.”

Nationally, the U.S. economy is showing signs of recovery, although not as strong as the recovery of the early 1990s, McCarty said.

Jobless claims are at a level indicating job growth, and with the exception of gasoline prices, inflation appears to be in check. Incomes also have grown, although much of this growth has been offset by the high cost of gasoline, he said.

The mortgage industry enjoyed a recent increase in applications because of a lowering of rates, but the number of applications will decline as interest rates climb, McCarty said. At the same time, the stock market is reacting unfavorably to anticipated interest rate increases, he said.

“It remains to be seen how everyday consumers will fare as interest rate increases translate into higher credit card rates and loans on big-ticket items such as cars,” 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 July was conducted from 426 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.