Lower gas prices, stock increases help boost Floridians' confidence

August 31, 2004

GAINESVILLE, Fla. — Consumer confidence among Floridians edged up slightly this month, driven by favorable conditions for gas prices and the stock market, University of Florida economists report.
The overall preliminary index gained two points to 96, and three of the survey’s five components also rose.

The biggest increase was in the component measuring expectations about personal finances a year from now, which rose nine points to 104. Perceptions about personal finances now compared with a year ago rose five points to 88, and perceptions about whether it is a good time to buy big-ticket items rose one point to 108.

The two components that declined were those measuring expectations about the U.S. economy over the next five years, which fell five points, and expected national economic conditions over the next year, which fell one point.

“The improvement in perceptions of personal finances was likely due to some increases in the stock market as well as lower gas prices,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research. “At this point, consumers have become accustomed to the rise in gasoline prices, which placed a drag on these components in previous months. It is also possible that some consumers are looking toward the elections in November positively, whoever their chosen candidate may be.”

Although Floridians’ confidence matches national confidence as measured by the University of Michigan, the national economy remains mixed, McCarty said.

The economic recovery is continuing, but job creation is much slower than in previous recoveries, he said. Sales growth is relatively weak compared with the same time last year, and if the Federal Reserve raises interest rates as expected, consumers may respond by curtailing spending, he said.

Confidence among Floridians under 60 rose six points to 103 in the survey, but it

declined seven points to 80 among those 60 and older. That’s four points lower than the same time last year, which was unexpected because that was at an earlier stage in the recovery, McCarty said.

“Contrary to their younger counterparts, seniors this month expressed pessimism over their current and future finances,” he said. “They were also far more pessimistic about long-term business conditions. This will certainly play a role in the upcoming elections because seniors tend to vote in higher proportions than younger people.”

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 August was conducted from 455 responses. The error rate is plus or minus 4.5 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.