Florida consumer confidence rises for third consecutive month, study finds (10/2/2008)

Consumer confidence among Floridians rose three points in September to 70, marking the third month of increases since the index hit its all-time low of 59 in June, a new University of Florida study finds.

"Despite the turmoil in the economy, Floridians are overall a little more upbeat about the economy than last month," said Chris McCarty, director of UF's Survey Research Center at the Bureau of Economic and Business Research. "We took a preliminary reading in the middle of the month and noted that confidence was actually a bit higher at 73, in spite of the announced takeover of Fannie Mae and Freddie Mac."

The preliminary survey reflects data collected only up through Sept. 24, McCarty said. A revised number for September released next month will reflect additional survey data collected during the final six days of September, he said.

The number being reported for September takes into account the opinions of those surveyed after the announcement of problems with AIG, the bankruptcy of Lehman Brothers and the proposal of a $700 billion bailout, McCarty said. These interviews over the past two weeks pulled the overall index down three points, but the index for this two-week period still remained unchanged from the previous month at 67, he said.

"The index was declining in the past two weeks, and no doubt Monday's drop in the stock market will shake confidence next month," he said.

Even so, McCarty said he is not sure the stock market decline will cause the bottom to fall out of consumer confidence. The stock market has already experienced some wild swings lately, falling 504 points earlier in the month, and in percentage terms, Monday's 7 percent decline doesn't approach the 20 percent drop in 1987, he said.

In Florida, though, problems continue to dampen the economic picture, he said.

"Consumers in Florida have reason to be gloomy," McCarty said. "Housing prices have fallen almost 28 percent from their peak in June 2006. Unemployment in Florida for August is now estimated to be 6.5 percent, the highest since 1995. And tourism in Florida is down based on air traffic data from airports such as Orlando and Miami."

In addition, retail sales in Florida, as reflected in the sales tax collected from the Florida Department of Revenue, are down considerably over the past two years, he said.

"There are some positives here in Florida," McCarty said. "There are signs that housing sales are stabilizing in some Florida markets and while it will be a long time before prices climb back to their peak, I believe prices in many parts of the state are at or near bottom."

Although many economists think prices nationally will continue to fall through 2009, they are now down to 2004 prices and may not go much lower, he said.

"There is a price below which homeowners cannot sell because the price is substantially lower than they owe," he said. "Homeowners will go to great lengths to stay in their home under those circumstances."

The rise in this month's consumer confidence reading was fueled by increases in three of the five index components. The biggest rise was in perceptions of whether it is a good time to buy big-ticket items, which jumped 10 points to 67. Expectations of personal finances a year from now rose four points to 86, while perceptions of U.S. economic conditions over the next year rose three points to 67.

The remaining two components remained unchanged. Perceptions of personal finances now compared with a year ago remained flat at 51. The component measuring perceptions of U.S. economic conditions over the next five years was unchanged at 80.

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 September was conducted from 471 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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