Consumer sentiment among Floridians fell in May by two points to 78, according to a new University of Florida survey.
“While the decline was significant, the overall index at 78 is well within the range we have been seeing for the past year,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “Much like other economic indicators, consumer sentiment seems to be stuck in a relatively narrow range; the index is neither trending down or up.”
Of the five components making up the index, two increased, two decreased and one remained unchanged. Survey takers’ overall perception that their personal finances are better now than a year ago rose two points to 71, only one point below the postrecession high achieved in March. Their expectation of better finances a year from now remained unchanged at 78.
Respondents had a gloomier assessment of the U.S. economy, especially among those under age 60 and those with slightly higher incomes, McCarty said. Their confidence in the nation’s economic conditions for the coming year fell four points to 74, and it dropped five points to 76 when they considered its performance over the next five years.
Finally, expectations of whether it is a good time to buy big-ticket items, such as automobiles, rose three points to 89.
Consumers should expect mostly modest changes in June, McCarty said. The unemployment rate in Florida declined again in April down to 6.2 percent, only slightly better than 6.3 percent in March, which nearly matches the nationwide rate. “Professional and business services continue to create the most jobs, followed by leisure and hospitality,” McCarty said. “Most major employer categories, in fact, showed increases with the exception of manufacturing.”
Construction also continues to add jobs. That trend, however, could slow if the housing market declines as expected in coming months. The median price of a Florida single-family home rose by $2,000 to $175,000 in April, as UF economists expected; however, those price gains have slowed lately. Policy changes by the Federal Reserve, Federal Housing Administration and Fannie Mae could boost higher interest rates and hinder housing price gains even more.
“The more immediate driver of the slowdown in housing is that prices have largely returned to their trend price, removing the effect of the housing bubble,” McCarty said. “We are now at a more sustainable housing price level, but if prices increase too rapidly they will become unaffordable for a large demographic who, though employed, have lower-paying jobs than they had before the recession. In some markets, this has already happened.”
Many economists expect a correction in the stock market soon, although they disagree over when it will happen. “We are past the duration of an average bull market,” McCarty said. “Florida investors should expect a pullback in the stock market as a natural part of the business cycle.”
Inflation rose in April to a level more consistent with a growing economy. Florida gas prices fell during May but are expected to increase to almost $4 per gallon before tapering off after Labor Day.