UF study: boost in fuel prices hurts Florida consumer confidence

July 26, 2005

GAINESVILLE, Fla. — Florida’s consumer confidence dropped three points to 93 in July, largely because fuel prices have inched up again, University of Florida economists report.

The biggest drop was a six-point decline to 82 in perceptions of the U.S. economy over the next year. Three of the other five components also declined. Perceptions of personal finances now compared with a year ago fell five points to 85; perceptions of the U.S. economy over the next five years dropped four points to 85; and perceptions of whether it is a good time to buy big ticket items slipped one point to 113. Perceptions of personal finances a year from now gained one point to 99.

“Gas prices have returned to their higher levels after a temporary drop in late May and early June,” said Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research. “This is probably a large part of the reason for the drop in Florida.”

Floridians were a little less confident in July compared with the national index, McCarty said. In contrast to Florida’s three-point loss, the national consumer confidence index as measured by the University of Michigan rose half a point to 96.5, he said.

Overall, there was little difference in the index change between older and younger respondents as there had been in previous months, when the sentiments of Floridians 60 and older were at higher levels, McCarty said. Households with lower incomes gained in July while higher-income households declined slightly, he said.

“This difference was most likely due to weak gains in the stock market at the beginning of the month,” he said. “Since then the market has performed well. The terrorist bombings in London may have had some effect, although apparently not much on higher-income households.”

McCarty said he expects consumer confidence to remain at about the same level next
month because gasoline prices are predicted to remain high.

“Some positive news on the national front, such as the change in China’s policy on pegging their currency to the dollar, may provide some lift for the stock market,” 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 402 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 predict buying patterns, consumer confidence tends to be available sooner.

The index is benchmarked to 1966, so 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.