Florida’s consumer confidence falls as tax rebates disappear

GAINESVILLE, Fla. – May 26, 2010 – Florida's consumer confidence dropped seven points to 71 in May as homebuying and energy efficient tax rebates ended, according to a new University of Florida (UF) survey.

"We expected a big decline in consumer confidence as these two major stimulus programs ran out," says Chris McCarty, survey director of the Bureau of Economic and Business Research. The tax rebates helped one component of the measure: People's impression that conditions were right for buying big ticket items.

"Without that stimulus, that particular component fell, although not to pre-April levels," McCarty says. This month, all five of the index components registered declines.

The sharpest drop was in expectations for U.S. economic conditions over the next year, which dropped 14 points to 68, while expectations of U.S. economic conditions over the next five years fell six points to 73. The second largest decline was in perceptions of whether it is a good time to buy big-ticket items, which fell eight points to 79. Expectations of personal finances over the next year dropped four points to 80, while perceptions of personal finances now compared with a year ago fell one point to 56.

The 14-point drop in perceptions of short-term economic conditions "probably reflects declines in the stock market and to some extent interpretations by consumers of the effect of the Gulf oil spill. It is not unusual for major events to make their way into that particular component.

"Many economic pundits have raised the questions as to how much of the increased (single-family home) sales and prices are due to the stimulus," McCarty says. "We may not know this until the fall as the spring homebuying season has largely passed."

The Federal Reserve Board is no longer buying mortgage-backed securities and is debating when to start selling them. This will likely translate into higher interest rates for mortgages over time, McCarty says.

Florida's unemployment rate improved in April to 12 percent, down .3 percent from March, but it remains to be seen how much of that decline is due to the large number of temporary workers for the U.S. Census Bureau. The Census planned to hire about 89,000 workers, most for no more than three months, McCarty says.

McCarty foresees little change in the economy in the near future.

"We expect Florida's consumer confidence to remain in the low 70s for the next several months unless the effects of the oil spill show a direct effect on Florida, the stock market continues to decline or Florida has a bad hurricane season, in which case it would fall lower," he predicts.

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 May was collected from 402 responses.

© 2010 Florida Realtors®