Floridians’ Confidence in Economy Unchanged in August

GAINESVILLE, Fla. – Aug. 28, 2013 – Florida’s consumer confidence level was unchanged in August, matching July’s revised reading of 77, according to a University of Florida (UF) survey.

Three of the five categories in the August survey declined, while two increased. Respondents’ perceptions of whether they are in better financial shape now than they were a year ago fell one point to 62, but they expect better times ahead: Their expectations of improved personal finances a year from now rose six points to 81.

Meanwhile, confidence in the U.S. economy over the coming year dipped three points to 76; however, their trust in its performance over the next five years went up three points to 78.

Finally, Floridians’ belief of whether now is a good time to buy a big-ticket item, such as a television, dropped six points to 86.

The overall pessimism was driven primarily by concerns over personal finances and buying conditions, says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research.

“While the big drop in confidence for July was mainly from low-income and younger Floridians, a group that remains more pessimistic, there was slightly growing pessimism among older and higher-income Floridians as well in August,” he adds.

The fall in Florida’s July confidence level surprised economists because it contrasted with a rise in confidence for the nation. However, a new preliminary August index from the University of Michigan, measuring consumer sentiment at the national level, fell five points, indicating that a gloomier public outlook is now emerging across the country.

Nonetheless, Florida’s drop in confidence is occurring as other state economic indicators are showing positive signs. Unemployment in Florida, for instance, was unchanged in July at 7.1 percent, lower than the national 7.4 percent level.

Gas prices dropped slightly in August and inflation overall has not been a significant burden on consumers. Construction jobs are increasing again, although they are half what they were at the peak of the housing boom in 2006. Housing prices continued to rise in July, with the median price for an existing single-family home in Florida increasing by $2,500 to $177,500.

However, Floridians should not expect a return to the 2006 level anytime soon.

“It is unlikely that housing prices will continue rising a lot higher, particularly when interest rates have jumped 1.2 percent since February,” McCarty says.

September could bring two negative economic factors into play: First, the Federal Reserve might stop purchasing billions of dollars of mortgage securities every month to keep interest rates low and stimulate economic growth.

“While Floridians have recovered some of their losses in equity since the trough in prices in February 2011,” McCarty says, “they should not expect prices to go a lot higher if the Federal Reserve carries through with its exit strategy.”

Also next month, Congress is expected to have another contentious debate over whether to raise the debt ceiling again if the federal government runs out of funds as the Treasury Department expects.

“Both of these events will likely lead to pessimism among consumers as they weigh the effects, such as a lower stock market and discussions about who is going to shoulder budget cuts,” McCarty says.

Conducted Aug. 1-22, the UF study reflects the responses of 415 individuals, representing a demographic cross-section. The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest is 150.