Consumer sentiment among Floridians dropped for the second month, falling seven points to 87.6, the lowest reading since December, according to the latest University of Florida consumer survey.
The sharp decline is in line with the University of Michigan’s mid-month reading for the U.S., which also fell by seven points.
Four of the five components that make up the index fell in May. Perceptions of personal finances now compared with a year ago rose by less than a point to 86.1, while expectations of personal finances a year from now fell by nearly 10 points to 93.4.
Expectations of U.S. economic conditions over the next year fell nearly nine points to 84.3, and long-term expectations of U.S. economic conditions over the next five years fell more than 10 points to 79.7. Perceptions as to whether it is a good time to buy big-ticket items fell 7.7 points to 94.2.
“We anticipated a slight increase in consumer sentiment rather than a reversal of this magnitude,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “Most of the pessimism in May stems from expectations about future conditions. Perceptions of current finances remained largely unchanged across age and income groups. But younger and lower-income respondents see difficult times ahead in their own finances in the next year.”
Meanwhile, respondents age 60 or older are pessimistic about the future of the U.S. economy.
“The largest overall decline was in expectations of national economic conditions over the next five years among older respondents,” McCarty said. That plummeted more than 20 points, from 87.0 to 66.6.
“One theory is that consumers are expecting prices to rise over the next year and are anticipating being worse off because of this,” McCarty said. “Some of this is based on concerns over the money that has been created by the Federal Reserve following the Great Recession. The pessimism this month may reflect an attitude among some Florida consumers that prices cannot continue being low.”
For Floridians, an additional source of unease may be the abrupt ending of the legislative session in Tallahassee, with news of a special session to resolve the state budget. Many people still remember the wide-ranging impact of the federal government shutdown of 2013. Even if they are not affected by the healthcare issues at the heart of the debates, they may feel uncertainty around planned vacations to state parks and other state services.
While these numbers reflect a Florida consumer anticipating financial downturn, most economic indicators are still positive. Florida unemployment declined in April to 5.6 percent, only two-tenths of a percentage point higher than the U.S. rate.
All but one employment category — information jobs — made gains. On the negative side, the Florida labor force contracted again and is now at a post-recession low of 59.5 percent, the lowest since 1984. “Florida must reverse the trend toward lower labor force participation to fully recover from the recession,” McCarty said.
Housing continues to remain positive, with the median price of an existing single-family home increasing by $5,000 to $195,000. Closed sales remain at multi-year highs. The typical pattern is for prices to decline in mid- to late summer, although the potential for a rise in mortgage rates tied to the Federal Reserve may encourage some buyers to be more competitive with pricing before that happens.
Prices at the gas pump rose by almost 10 cents in May but are expected to decline again. While there have been a few minor declines in the stock market in May, each time it regains those losses and rebounds to record highs, although trading volume has been low.
Conducted May 1-24, the UF study reflects the responses of 409 individuals who were reached on cell phones, 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.