Florida Consumer Confidence
We have been observing and reporting an array of improved economic metrics throughout the last few months. We are now reporting that Florida Consumer Confidence is on the rise as well. It is a critical one because the Retail Industry drives about 70% of our economy, and there is a strong correlation between consumer confidence and spending.
Consumer confidence among Floridians rose another point in June to 82, according to a University of Florida survey.
This is the fourth straight month of increases for a post-recession high.
“The increase in our index for June is so far led by a relatively large increase in perceptions of personal finances,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “There are several reasons for this increase, but the stock market gains for the first part of June certainly played a role in that. It’s worth noting that perceptions of current buying conditions are at a post-recession high of 93.
“The last time it reached this level was April of 2007 when it was 97. This was the beginning of the collapse in the housing market.”
Perceptions of personal finances now compared to a year ago rose three points to 70 while expectations of personal finances a year form now stayed flat at 82.
Expectations of U.S. economic conditions over the next year rose two points to 83 while expectations of U.S. economic conditions over the next five years rose a point to 83. Perceptions as to whether it is a good time to buy big-ticket items such as a car or large appliance rose two points to 93.
“For now consumers are still not registering any fears about the effects of sequestration,” said McCarty. “Most are concerned by the possibility of a rise in interest rates as the Federal Reserve signaled it may reduce its intervention, specifically by reducing the amount of Treasury bonds and mortgage backed securities it purchases totaling $85 billion each month.”
Concerns over this move is likely over-stated for two reasons, McCarty said.
First, the Fed is unlikely to reduce the purchases to zero but will likely gradually reduce the effort. If the economy shows signs of weakness the Fed will resume the intervention, he added.
It is also worth noting that conditions are not the same as they were in 2008 when quantitative easing began, he said. While the housing market is certainly helped by lower interest rates, there had been a low rate of building and an increase in population, leading to pent-up demand.
Housing prices may decline from their recent highs, but the underlying quality of loans is now very different from 2008. Recent buyers have good credit scores and typically put 20 percent down on their homes. This means that we will not see the massive foreclosures that led to the last recession, McCarty said.
“The Fed has seen the economy through dangerous economic times, but the economy is now operating normally. There was nothing normal about 2008,” he said.
Now that we are living in the “new normal”, things are slowly but surely improving. It is encouraging and gratifying to see most economic indicators improving.