Posted by: realtormarkpalace | January 26, 2011

UF: Floridians grow suddenly optimistic about economy

GAINESVILLE, Fla. – Jan. 25, 2011 – Consumer confidence among Floridians soared an unexpected seven points to 77 in January from the revised December index score of 70, according to a new University of Florida survey.

The increase is the largest since the index rose seven points from March to April 2010, and the score of 77 is the highest since the April 2010 mark of 78.

“The size of this increase in confidence among Floridians was not expected,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “Confidence among Floridians had been mired in the low 70s for the past few months, consistent with other economic indicators that characterize the Florida economy.”

Each of the five components that make up the index registered gains, with the largest increase coming in the perceptions of U.S. economic conditions over the next year category, which climbed 12 points to 78. Confidence in that category had been mired in the 60s for eight months.

Confidence in purchasing big-ticket items, such as cars and appliances, rose eight points to 84, and perceptions of U.S. economic conditions over the next five years also reached 84, a six-point increase. Perceptions of personal finances now compared with a year ago rose four points to 55, and perceptions of personal finances a year from now rose two points to 83.

The sizable increase in confidence is even more surprising, McCarty said, considering the unemployment in Florida remains at 12 percent and the Florida housing market dropped in value.

McCarty thinks the unexpected rise may have resulted from sustained gains in the stock market over the past two months and recent media coverage that has focused on an improving economy.

McCarty said the Dow and S&P Industrial Average have steadily increased and the current bull market is expected to continue through the year. McCarty said the gains are being driven by leaner companies that have a more international footprint than in the past.

Floridians are benefitting as their investments in the stock market – either directly or through 401(k) and pensions – have improved their portfolios, McCarty said.

Despite the increase in confidence, unemployment and declining housing prices remain troublesome. While most economists expect marked improvement on the job front over the next year, McCarty said, unemployment will remain high. Over time, however, new jobs outside the construction sector will replace those lost, and many unemployed Floridians who are near retirement will choose early Social Security at age 62.

The median price of a single-family home in Florida dropped to $133,100. McCarty said the housing declines have been less dramatic over the past year and prices aren’t expected to plummet, but further declines are still possible.

McCarty said inflation will become a factor over the next year with the price of gasoline and basic foods increasing. And he warns that inflation could be a long-term problem unlike in previous periods. McCarty said much of the rise in inflation is driven by increased and permanent demand for growing economies, such as China and India.

Although the rise in consumer confidence was unanticipated, McCarty cautions that the index could return to previous marks.

“Looking forward, we expect consumer confidence to fall back to the low 70s, particularly as both the federal and state government announce many of the inevitable spending cuts to balance budgets,” McCarty said. “Many of those cuts will affect Florida consumers directly and will potentially affect the stock market, which is the most positive indicator this month.”

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 January was collected from 418 responses.

© 2011 Florida Realtors®

 

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