For now, consumers are more confident
A big jump in confidence among Floridians could be short-lived.
Published: Tuesday, January 25, 2011 at 9:59 a.m.
Last Modified: Tuesday, January 25, 2011 at 11:36 p.m.
Florida consumer confidence took an unexpected 7-point jump in January, a leap that defies most economic indicators and could come back down in subsequent months, according to a University of Florida researcher.
The index reached 77 from a revised 70 in December, the largest one-month increase and the highest total since April, before the BP oil spill, according to a survey by the UF Survey Research Center in the Bureau of Economic and Business Research.
Survey Director Chris McCarty said the surprise increase may be due to stock market gains of the past two months and recent media coverage focused on an improving economy.
A similar jump in the Conference Board's U.S. confidence index — to an eight-month high of 60.6 from 53.3 in December — was attributed to an improving labor market, The Associated Press reported.
McCarty said a lot of pundits have focused on the record levels of cash companies have been sitting on that will have to be spent on hiring to grow. While that makes for good news, he cautioned that hiring will not approach anywhere near pre-recession levels anytime soon.
On the other hand, those with jobs are more secure since layoffs have stopped and wages are growing, so their spending should be reasonably healthy, McCarty said. But high unemployment is still a big drag on spending.
A lot of companies' stock market gains have been from growth outside the U.S., "not necessarily things that are going to help people in the United States or Florida," he said.
Declining housing prices in Florida remain troublesome, he said. Inflation will also become a factor over the next year with demand from China and India driving up prices for gasoline and food.
"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 Florida and U.S. surveys measure consumers' mood about spending over time, the Florida survey benchmarked to a 1966 level of 100 and the U.S. survey to 1985. They do not reflect comparable levels of confidence.
Of the Florida survey's five components, the biggest increases in confidence were about U.S. economic conditions and in purchasing big-ticket items, followed by feelings about personal finances.
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