“This is a welcome turnaround in consumer confidence,” says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “The rise in confidence in May was particularly strong among those under age 60 and those with household incomes above $30,000.”
Three of the five components in the study showed rising confidence. For example, the overall expectations among respondents that their personal finances will improve in the coming year jumped eight points to 87 from last month. Confidence in the U.S. economy in the coming year went up one point to 74, while trust in economic conditions over the next five years rose five points to 81.
Perceptions of whether now is a good time to purchase big-ticket items such as houses, automobiles and refrigerators remained unchanged at 80. Only one component showed a decline: Respondents’ assessment of their current financial situations compared with a year ago, which fell one point to 62.
The sudden rise in consumer confidence is strange given “the potential ‘fiscal cliff’ due at the beginning of 2013 that is now being reported in the news,” McCarty says. Several pressing economic issues, unless acted upon by Congress and the president, could dampen the current optimism, notably expiring Bush tax cuts. In addition, mandated automatic cuts in domestic and military spending and yet another battle over raising the debt ceiling could shake consumer confidence.
However, several trends should give Floridians something to cheer about, McCarty says. For instance, the cost of gas has dropped almost 33 cents a gallon in Florida over the past month.
“This reversal is due in large part to decreasing demand internationally as Europe struggles with a recession and China’s economy slows,” McCarty says. “Lower gas prices not only help Floridians at the pump but should result in more Florida vacations this summer that will keep the tourist sector busy.”
In addition, unemployment continues to fall in Florida. The rate is now 8.7 percent, which is only six-tenths of a percent higher than the national unemployment rate. Recent Florida labor data also reveals an encouraging rise in jobs in the professional and business services sectors. “This is a welcomed change from last year when job gains were concentrated in tourist-related industries,” McCarty says.
Nonetheless, some employment problems linger in Florida. The construction sector, for example, remains in the doldrums, a casualty of the housing bubble. Governments, too, have seen substantial job losses, resulting from ongoing budget cuts.
Finally, many job seekers have become discouraged and quit seeking work. “As the recovery takes hold, some of those will come back into the labor force resulting in an increase in unemployment,” McCarty says. “This will actually be a sign of healing in the job market.”
“The increase in confidence this month reversed the trend we were repeating from last year,” says McCarty. “If we can continue this trend, it will bode well for Florida’s economy. Increased confidence typically means increased consumer spending that will result in more jobs.”
Conducted between May 12 and 24, the UF study reflects the responses of 411 individuals who represent a demographic cross section of Florida. 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.
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