Florida consumer confidence rises as residents look to the future (8/3/2008)

Consumer confidence among Floridians rose one point to 60 in July from its revised index and all-time low record in June, signaling that state residents may be looking ahead to when the housing market picks up, a new University of Florida study finds.

"Consumers are quite gloomy about their current finances but expect some change over the next year," said Chris McCarty, director of UF's Survey Research Center at the Bureau of Economic and Business Research. "Housing sales and prices have been declining steadily, but that cannot go on forever. Floridians may be looking ahead to a bottoming out of home prices, which may come sooner than expected, and a pick up in sales, which will probably not occur until next year."

Although most economic news is negative, one recent piece of positive news is that oil prices have declined, brought on by a combination of lower demand and less speculative buying, McCarty said.

The index for June was revised from its preliminary figure of 57 to 59, still making it the lowest point in the index's 25-year history. The previous low was 63 in May.

In July, three of the index's five components declined and two rose. Perceptions of personal finances now compared with a year ago dropped four points to 47, falling to another all-time low for that component. Until now, last month's five-point drop to 51 had been that component's low record. Also declining were perceptions of U.S. economic conditions over the next five years, which fell two points to 67, and perceptions of U.S. economic conditions over the next year, which fell one point to 50.

The remaining two components were perceptions as to whether it is a good time to buy big-ticket items, which rose nine points to 59, and perceptions of personal finances over the next year, which increased six points to 79.

Despite this optimism, an abundance of pessimistic economic indicators persists, McCarty said.

"There are continued negative earnings reports from banks and financial institutions, and nothing but bad news from automakers," he said. "At the same time, jobless claims are still high and there is no reason to believe that will not continue in the near term."

In addition, the Federal Reserve Board has made it clear that it will not lower interest rates and may even consider raising them in the next few months, McCarty said.

"Consumer confidence over the next few months will probably stay at these very low levels, but is not likely to go much lower," he said. "Consumers tend to absorb both good and bad news over time. At this point, they have factored in high prices, job insecurity and instability in the housing and financial markets."

While the remainder of the year is likely to be quite difficult for retailers, McCarty said he does not expect pessimism about the economy to get much worse under current conditions.

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 407 responses.

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. Based on the University of Michigan method, 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.

Note: This story has been adapted from a news release issued by the University of Florida

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