Consumer Confidence Bump Vexes Researchers

U.S. consumer confidence improved nearly six points last month overall, with a similarly steady four-point bump here in Florida. The recent results reflect optimism regarding the long-term future of the state and national economy, and not the significant downturn that many University of Florida researchers were predicting.

“The rise in confidence comes as a surprise given what is happening in the economy that should be affecting consumers,” said Chris McCarty, who runs the Florida Consumer Attitude Survey at the school’s Bureau of Economic and Business Research.

“Gas prices declined a bit in June, but so did the stock market. The Federal Reserve has induced rises in interest rates on credit cards and home loans. It’s unclear why consumers are so optimistic about the future,” he said.

Perception of national economic conditions over both the short- and long-term rose significantly, as did expectations about personal finances a year from now. McCarty urged, however, that the confidence level could soon drop again because of the tenuous Florida housing market.

In particular, buyers who took out low-interest, adjustable-rate Florida home loans around three years ago are about to be inundated by adjusting (and rising) rates as the loan matures. This could also spark a widespread trend of mortgage refinancing.

“It is unclear how many Florida households will be impacted by this phenomenon, but we should keep in mind that Florida has one of the highest rates of using these types of loans over the past several years, given the high appreciation of housing prices,” McCarty said.