Florida consumer confidence up

GAINESVILLE, Fla. -- Feb. 1, 2006 -- Florida’s consumer confidence rose four points in January to 95, its highest level in six months, reflecting optimism about record-high employment, an upswing in the stock market and a pre-holiday dip in gas prices, University of Florida (UF) economists report.

The increase in confidence was broad-based, with growth in all five components of the index. The largest gain was in perceptions of U.S. economic conditions over the next five years, which rose six points to 90. Expectations about personal finances a year from now rose five points to 100. Perceptions as to whether it is a good time to buy big-ticket items also increased five points to 110. Perceptions of U.S. economic conditions over the next year rose four points to 88. Finally, perceptions about personal finances now compared with a year ago inched up one point to 89.

“Consumers continue to be optimistic about the economy here in Florida,” says Chris McCarty, director of the survey research center at UF’s Bureau of Economic and Business Research. “The employment situation here in Florida is better than it has been in decades, at least in terms of people having jobs. The stock market had a pretty good run in January, too, ending near 11,000.” Plus, McCarty adds, high heating bills have not burdened residents because the state has had uncharacteristically warm weather this winter.

Gas prices were edging down in November and December, even though they have risen since then. Although gas prices are still slightly higher than they were at this time last year, McCarty says they have been offset by steady personal income growth.

“This all translates to higher consumer confidence, and during the holiday season resulted in a moderate increase in sales, mostly due to sales in November rather than December,” he says. “But moving forward, we expect a decline in consumer confidence as several factors come to bear on the consumer.”

Energy prices are expected to increase, at least through April, and although interest rates may not rise much higher, they are unlikely to decline for quite some time, he said.

“This has already put pressure on housing prices and sales in some key Florida markets,” he says. “Homeowners that were expecting quick turnover in their property will no doubt be forced to hold on to it longer. This will be particularly true for those that purchased high-priced condominiums in Florida’s coastal markets.”

The slowdown in housing will affect other areas of the economy, such as sales at furniture, appliance and home-improvement stores, McCarty says. He predicts that by the end of 2006, housing prices will slowly decline in some areas, affecting consumers’ ability to extract home equity and ultimately hurt spending.

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 January was conducted from 436 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.
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