Shutdown Spurs Big Drop in Floridians’ Confidence in Economy
Source Newsroom: University of Florida
Newswise — GAINESVILLE, Fla. — Florida’s consumer confidence fell sharply in October to 71, down seven points from September and its lowest level in nearly two years, according to a new University of Florida survey.
“This is the lowest reading since December 2011 following the last debt ceiling showdown in August of that same year,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research.
“Confidence among Floridians was already declining prior to any indication of a shutdown and debt ceiling debate,” McCarty said. “However, there is no doubt that confidence in September took a hit as we replayed the events of August 2011, the last time the U.S. was precariously close to a default. Much like the rest of the country Floridians were not happy with the prospect of defaulting on our national debt and a prolonged shutdown of federal services.”
All five components used in the index decreased. Respondents’ overall consensus over whether they are personally better off financially now than a year ago fell three points to 62. Their expectations of improved personal finances a year from now was 74 — a decline of six points from September.
The survey-takers’ confidence in the U.S. economy over the coming year dropped eight points to 68, as their outlook for the nation’s economic health over the next five years sank two points to 73. Both components are their lowest level since December 2011.
Meanwhile, their view that the present is a good time to buy a big-ticket item, such as a vehicle, fell 11 points to 80.
Seniors were the survey’s most pessimistic respondents. Their ratings fell in all five categories with two showing dramatic declines.
“Respondents age 60 and over registered a 12-point drop in expectations of U.S. economic conditions over the next year and a 20-point drop in perceptions as to whether it is a good time to buy big-ticket items,” McCarty said.
The older respondents were likely troubled by the prospect of the federal government defaulting on its debts, which would delay Social Security checks and negatively affect the stock market, hurting retirement accounts, McCarty said.
Anxiety over the federal shutdown and debt ceiling problems was not the only cause of October’s confidence decline. There was also concern over Florida state revenues. Although a surplus is now expected, revenues may be smaller by the beginning of the year if Floridians and tourists decide to spend less, McCarty said.
Floridians also may see a rise in unemployment in September, especially in the leisure and hospitality sectors, when new statistics, which were delayed by the shutdown, are released next month.
“The expected decline is due to a pullback in consumer discretionary spending that will show up in retail sales data, which is another indicator with a delayed release date, as the census was part of the shutdown,” McCarty said.
Another sign of growing pessimism is the news that the median price of a single-family home fell in September to $170,000 from a post-recession high of $177,500 in July, according to a Florida Association of Realtors study. The finding is significant because it predates the shutdown.
“Though new housing listings were up over 20 percent compared to those in September of last year, they may reflect an eagerness to sell before mortgage rates increase beyond the reach of some buyers,” McCarty said.
McCarty also noted that while the Federal Reserve is unlikely to change course until the new year, it is likely to purchase fewer mortgage-backed securities by the end of the first quarter, which it has been doing in recent months to keep interest rates low.
“As the holiday season is upon us, we estimate weaker-than-usual sales as the Florida consumer remains pessimistic, particularly since new debates among lawmakers are due in January,” McCarty said. “The effect of this could be reversed if lawmakers signal agreement on the postponed debt-ceiling debate sooner.”
Conducted Oct. 1-24, the UF study reflects the responses of 411 individuals, representing 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.
Details of the October survey can be found at http://www.bebr.ufl.edu/cci.