Consumer sentiment among Floridians declined by one point in April to 79. Among the five components that make up the index three decreased and two increased. Perceptions of personal finances now compared to a year ago fell three points from a post-recession high to 69, while expectations of personal finances a year from now fell six points to 77. Expectations of U.S. economic conditions over the next year fell five points to 77 while expectations of U.S. economic conditions over the next five years rose five points to 82. Perceptions as to whether it is a good time to buy big ticket items such as an appliance or a car rose three points to 89.
“Much as we expected the overall consumer sentiment index is remaining relatively flat given the lack of significant economic news,” said Chris McCarty, the Survey Director. “This continues to be good news for the Federal Reserve as it allows them to focus on the true effects of their withdraw of economic support from the economy by tapering purchases of treasuries and mortgage backed securities and to signal a possible increase in short term interest rates before 2015. Here in Florida the economy remains on a steady path without any big changes either negative or positive. The year 2014 both at the state and national level will likely be dominated by the politics surrounding the gubernatorial and mid-term elections. Consumer sentiment in April at the national level actually went up to 84, now five points higher than for Florida.”
Last month the unemployment rate in Florida ticked up .1 percent to 6.3 percent while U.S. unemployment for March was 6.7 percent. An increase in unemployment in the current economic context is not necessarily a bad thing. A typical pattern after most recessions is for unemployment to temporarily increase as previously discouraged workers see more job availability and come back into the labor force. There is no doubt that Florida, like many states, lost workers from the labor force. The question is whether those workers permanently left, such as those taking early retirement, or whether they temporarily left for job training, or just biding time until the labor market improved. While unemployment went up last month so did the size of the labor force. While it is too early to tell this could signal improvements ahead in Florida jobs, at least in those having a job even if the wages for those jobs are lower than they were prior to the recession. Housing continued to improve in March with the median price for a single family home rising to $173,000, a level not achieved since last August. However a recent report on national new home sales for March was surprisingly down 14.5% indicating there may be a slowdown in housing this year compared to last year. Some slowing of gains was expected due to Fed tapering and changes to policies at Fannie Mae, Freddie Mac and the FHA that helped support the housing market. While the bottom will not fall out of housing and current prices will be mostly maintained, housing will not be the driver of the economy it had been in 2013. The stock market has continued to weather the Feds tapering and continues to remain near record highs despite some recent volatility. Economic news increasingly raises the strong possibility that we are in a bubble, particularly in certain areas of technology. The problem is that we don’t know where we are in that bubble, somewhere in the middle or near where it bursts. Many economists expect a correction in the Bureau of Economic and Business Research, University of Florida Florida Consumer Sentiment Index 2 stock market, perhaps as early as this fall. Inflation continues to remain low which is good for consumers in the short run but of great concern to economists who fear the long term effects, such as the potential for deflation which leads to decreased economic activity through weaker demand.
“Looking forward we expect consumer sentiment among Floridians to remain in the upper 70s to low 80s given the dearth of significant economic news,” said McCarty. “The greatest threats to confidence among consumers are potential international stores. The conflict between Ukraine and Russia has the potential to draw in Europe and ultimately the U.S. There is concern over a decline in the growth of the Chinese economy which is now so large those declines affect other economies, including the U.S.”
UF Survey Research Center
Bureau of Economic and Business Research
College of Liberal Arts and Sciences
University of Florida
P. O. Box 117145, Gainesville, Florida 32611-7145
Contact: Chris McCarty, Survey Director
Office: (352) 392-2908 ext. 100