Floridians remain confident about economy for second consecutive month

February 22, 2011

GAINESVILLE, Fla. — Consumer confidence among Floridians remained at 77 out of 100 in February further demonstrating the public’s positive view of the economy, according to a new University of Florida survey.

The index rose seven points last month, an unexpected increase considering the economic climate in Florida. That the index didn’t change dramatically after January’s increase is noteworthy.

“We had expected a correction to last month’s seven-point increase in consumer confidence,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “A second month at this high level makes it much less likely that the increase for January was an aberration and more likely that consumers view the economy and their personal economic situation as having improved.”

McCarty said several factors are contributing to Floridians’ increased optimism, and at the top of the list is the bull market in stocks that are lifting portfolios. Another factor, McCarty said, is that those nearing retirement age whose 401(k) accounts were almost halved by the recession have mostly recovered those losses.

Work wages have shown steady improvement and the stimulus agreement, passed by Congress at the end of last year, is now appearing in workers’ paychecks, increasing optimism about personal finances, McCarty said. Inflation has remained in check, McCarty said, but high inflation could resurface by the summer. Gas prices have begun to rise again and are expected to keep rising, as are prices for basic food items like wheat and corn, McCarty said.

“At 77, the index represents a dramatic improvement over consumer confidence for the past three years,” McCarty said. “The one exception was April 2010, when a confluence of tax rebates artificially lifted confidence. It fell in the following months as those programs ended and the Gulf oil spill raised pessimism. This month, the sustained higher level of confidence is more broadly based and is an indicator that consumers are seeing some stability in the overall economy.”

Among the five components that make up the index, four increased or remained the same. Confidence in purchasing big-ticket items such as cars and appliances had the largest gain, rising three points to 88, and perceptions of U.S. economic conditions over the next year rose two points to 79. Perceptions of U.S. economic conditions over the next five years (81) and perceptions of personal financial situation now compared to a year ago (58) were unchanged. The only component to decrease this past month was perceptions of personal finances expected a year from now, which dipped three points to 81.

There is also some good news for the unemployed. The national unemployment rate declined from 9.4 percent to 9 percent in January as several major national and international firms such as Google and The Home Depot have announced intentions to hire. Florida’s unemployment rate for January won’t be available until March 10, but hopes are the state will also reveal a decline in unemployment as well, McCarty said.

McCarty said housing prices have still shown some declines, but it appears that prices for single-family homes are bottoming out.

Although consumer confidence is high, McCarty said Floridians should be cautious as decisions on spending cuts both at the state and national level are expected the next few months. McCarty said signs point to many state workers and teachers losing their jobs and others receiving what are functionally a salary cut through forced pension contributions and lower state contributions for health care.

The divisions in Congress cloud the national picture, McCarty said, although there is already a freeze on federal pay increases in place. And McCarty said the cuts are far-reaching and could impact the private sector.

“Floridians should be aware that these cuts will affect them even if they are not government employees,” McCarty said. “For example, job and wage losses among government employees will result in lower demand and consumption, which will affect Florida businesses … Many private businesses depend on government payments as well. Therefore, consumer confidence may remain elevated over the next few months but will likely fall sharply as budget cutting measures fall into place.”

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 February was collected from 439 responses.