Floridians' Consumer Confidence Falls After Soaring Gas Prices

GAINESVILLE (CBS4)-  Consumer confidence among Floridians dropped for a third consecutive month -- falling to 68 in April -- as the economy struggles because of domestic budget woes, soaring gas prices and international unrest, according to a new University of Florida survey.

Four of the index's five components decreased, including perceptions of personal financial situation expected a year from now, which fell 11 points to 69, a record low. That's the largest single-month decline in that component since July 1990, when tensions in the Middle East and an oncoming recession led to a similar decline.

The speculation, said Chris McCarty, director of UF's Survey Research Center in the Bureau of Economic and Business Research, was that the sharp decrease was created by "seniors who are increasingly hearing deficit-reduction plans that include Medicare, and low-income households who at the state level are anticipating cuts to Medicaid and other programs." But a closer look at the survey results indicates the decline in confidence is more widespread.

"A further examination of the data shows that the component declined across all categories and dropped 17 points among respondents under age 60," McCarty said. "It appears that the public is beginning to understand that budget cuts at the state level and deficit reduction at the national level will likely affect everyone in the U.S., young and old, rich and poor."

Confidence in purchasing big-ticket items such as cars and appliances had the second-largest drop, falling five points to 75. Perceptions of U.S. economic conditions over the next year dropped two points to 65, and perceptions of personal financial situations now compared with a year ago fell one point to 57. The only index component that didn't decrease was perceptions of U.S. economic conditions over the next five years, which remained at 74.

"We think Floridians have, for the most part, processed the news from Libya and Japan and are now focused on state and national debates about the budget," said McCarty. "At the state level, many people know the options the Florida Legislature is considering, although it is still unclear what will actually become law. At the national level, the conversation has only begun, at least in the public eye. Inevitably deficit reduction will have to involve modifications to at least one of the big three entitlement programs, Medicare, Medicaid and Social Security, and very likely all three. As details of those modifications unfold, consumer confidence may decline further as those three programs collectively affect virtually all Floridians."

Despite the decline in confidence among Floridians and gas prices across the U.S. rising to near or above $4 a gallon, there was some positive news regarding home sales and unemployment. McCarty said Florida home sales increased and the median price of a single-family home in the state is $126,300, up $4,400 from the previous month. State unemployment fell 0.4 percent to 11.1 percent, and unemployment was down nationally as well. McCarty said the unemployment rate should decline over the next five years because of a combination of job creation and a declining labor force as the baby boom generation moves into retirement.

The research center, a part of the Warrington College of Business Administration, conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for April was collected from 402 responses.

The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest possible is 150.

THE NATIONAL INDEX

Nationally, Americans' concerns about jobs and inflation eased somewhat in April, pushing the Consumer Confidence Index higher.

The increase comes after an unexpected drop in March. But the measure had risen for five consecutive months before that and hit a three-year high in February, according to CBS4 news partner The Miami Herald.

The results suggest that an improving job market is outweighing rising gas prices and a horrible housing market as people weigh their view of the economy.

"Consumer's short-term outlook improved slightly, suggesting that the uncertainty expressed last month is easing," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "Inflation expectations, which had spiked, retreated somewhat in April."

The Conference Board said Tuesday the index rose to 65.4 from a revised 63.8 in March. Economists expected a smaller rise to 64.8, according to FactSet.

The index is still far from the reading of 90 that indicates a healthy economy. It hasn't approached that level since the recession began in December 2007.

Economists monitor confidence because consumer spending, including big-ticket items such as housing and health care, accounts for about 70 percent of U.S. economic activity and is critical for a strong rebound.

The Conference Board survey, which is conducted by The Nielsen Co. and based on a random survey mailed to 3,000 households, showed that the proportion of consumers expecting an increase in their income improved to 16.7 percent from 15.2 percent.

Consumers' assessment of the labor market improved modestly as well. Those saying jobs are "hard to get" fell to 41.8 percent from 44.4 percent, and those saying jobs are "plentiful" rose to 5.2 percent from 4.6 percent.

Chris Christopher, an economist with IHS Global Insight, says the data backs up that improvement. He said last month's shaken consumer confidence could have had more to do with unrest in Libya and Japan's earthquake and tsunami rather than fundamental worry over the economy.

"People lowered their expectations, and now they're bouncing back a little bit," he said. "Their evaluation of the current situation is stronger, and that jibes with employment numbers we are seeing."

Companies added more than 200,000 jobs in March for the second straight month, according to the government's jobs report released this month, the first time that has happened since 2006. The unemployment rate fell to a two-year low of 8.8 percent and has dropped a full percentage point since November.

Another encouraging sign, according to Deloitte Chief Economist Carl Steidtmann: consumers planning to buy a house in the next six months rose to 5.5 percent from 4.1 percent, the highest level since 1978.

The housing market could use the boost. Home prices are at their lowest level since the housing bubble burst in 10 major markets, according to The Standard & Poor's/Case-Shiller 20-city index, also out Tuesday. The index fell for the seventh straight month.

Still, Americans are facing high costs for gas and food, and although expectations about inflation fell during the month, they are still above what they were in October. The national average gas price is at about $3.87 per gallon and prices have increased for 35 straight days.

Overall, shoppers' outlook over the next six months improved slightly. The part of the index measuring those expectations rose to 82.6 from 81.3 last month. The Consumer Confidence Index's other gauge, which measures how consumers feel now about the economy, improved to 39.6 from 37.5 in February. It was the seventh straight month that measure improved.