Gas prices, debt impact Florida consumer confidence

GAINESVILLE, Fla. – May 28, 2008 – Florida’s consumer confidence in May fell one point to 65 and hit a new 16-year record low, according to the latest statistics from the University of Florida (UF).

Until now, last month’s reading had been consumer confidence’s lowest level since December 1991, when the index fell to 64, says Chris McCarty, director of UF’s Survey Research Center at the Bureau of Economic and Business Research.

“Last month I suggested that the checks might result in a temporary increase to consumer confidence in Florida,” says McCarty. “That would likely have showed up in one of the questions about personal finances, but those index components were essentially flat. Some of this is probably due to record gas prices and increasing debt obligations.”

The component measuring perceptions of personal finances now compared with a year ago remained at 59, its all-time low. Three of the index’s five other components dropped; perceptions of whether it is a good time to buy big-ticket items fell three points to 64; expectations about personal finances a year from now slipped one point to 78; and expectations about U.S. economic conditions over the next five years dipped one point to 71. The remaining component, perceptions of U.S. economic conditions over the next year inched up one point to 53.

Consumer confidence in May actually rose for lower-income households, as well as the elderly, but it is unclear why, McCarty says.

“Florida consumers are certainly in a tight spot,” McCarty says. “Housing prices are still declining, lowering the equity consumers have in their homes. Worse is the confusion about when price declines will stop.” McCarty says he expects many Florida housing markets to bottom out by July based on price patterns so far. Once these declines stop, consumers and lenders will know what homes are worth, as will potential buyers.

“This will dramatically improve circumstances in Florida, which is more dependent than other states on housing activity,” he says. “However, significant increases in housing prices are years away.”

The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. 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.

© 2008 FLORIDA ASSOCIATION OF REALTORS®

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