GAINESVILLE, Fla. — Florida’s consumer confidence dropped two points to 77 in November, portending lackluster sales for the holiday retail season, a new University of Florida study finds.
“The growing pessimism about U.S. economic conditions seems to be among all income levels,” said Chris McCarty, director of UF’s Survey Research Center at the Bureau of Economic and Business Research. “Overall we expect the holiday retail season to be weak compared to last year as consumers are cautious about spending too much. We expect growth in retail sales of no more than 3 percent and possibly much lower.”
With the continued decline in Florida’s housing market, consumers’ financial insecurity is increasing, he said.
Survey respondents were particularly pessimistic about U.S. economic conditions over the next year. That component of the index fell a steep 11 points to 62, in contrast to the index measuring perceptions of U.S. economic conditions over the next five years, which rose two points to 80.
“Florida consumers seem to understand the gravity of the fallout from the housing crisis and resulting credit crunch but they still believe in the long-term viability of the U.S. economy to turn this around,” McCarty said.
The housing crisis shows no signs of improving soon, with the consequences continuing to unfold, McCarty said. The downturn is having many indirect effects, in addition to hurting those who cannot sell their homes and those who have lost their homes to foreclosure, he said.
Lenders who resold loans or packaged mortgage debt in elaborate securities now face a backlash from investors, many of whom are international, McCarty said. This has created a shortage of credit, which previously fueled not only home loans but many other kinds of spending from corporations buying other corporations to individuals buying cars, he said.
Much of this financial activity is now on hold as investors, both domestic and international, wait to see how the situation plays out, he said.
“We expect the housing market to bottom out by the second quarter of 2008 at which time existing home prices will be low enough that some prospective buyers will make purchases,” he said. “However, 2005 prices are years away.”
This month’s drop in the overall confidence rate follows a two-point rise in October.
“We were a bit perplexed by the rise in confidence last month,” McCarty said. “It now appears that rise was a reaction to a short-term decline in gas prices early in October. Now that gas prices have gone up, as expected, confidence is at the same level as in September.”
Of the three remaining components making up the index this month, one fell, one rose and one remained the same. Perceptions of personal finances a year from now fell four points to 86, while perceptions of personal finances now compared with a year ago rose two points to 71. Perceptions of whether it is a good time to buy big-ticket items remained unchanged at 84.
Perceptions of personal finances showed a small improvement among low-income households, but a slight decline among middle and upper-income households, he said.
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 November was conducted from 475 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. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for the year. The value of the index is in comparing changes over time rather than looking at an isolated month.
Writer - Cathy Keen
Source - Chris McCarty
Source: University of Florida Media Release