Consumer Confidence, Spending Down in Florida
Consumer confidence soared nationally but slumped in the Sunshine State, where the housing market’s doldrums are deepening and the Florida mortgage woes are on the rise, according to separate studies this week.
The Consumer Confidence Index jumped to a six-year high of 112.6, its highest point since August 2001.
But the University of Florida’s index fell to 81, down from 82 in June and matching its May reading, as widespread Florida mortgage loan problems continued to be cause for concern.
The upbeat confidence index from the New York-based Conference Board was one of the few pieces of good news for investors on Tuesday.
The Commerce Department said spending slowed in June, and the Dow Jones Industrial Average plunged 146.32 points, or 1.1 percent.
Economists agree that the Florida housing market slump and high energy prices are proving a drag on the local economy.
“We have been saying for quite some time that the economy is in a vulnerable position due to the effects of the declining housing market,” said Chris McCarty, survey director at the University of Florida’s Bureau of Economic and Business Research.
“We attribute a large part of the decline in consumer confidence in July to the very weak housing market in the first and second quarter of 2007.”
According to the Florida Association of Realtors, the state’s median home price fell 5 percent from June 2006 to June 2007, while Palm Beach County prices were down 7 percent.
Florida unemployment rates rose in June as home builders laid off workers.
“Florida is the epicenter for all the problems that exist in the housing industry,” Miami real estate consultant Lewis Goodkin said in July.
During the housing boom, consumers could use rising home equity to fuel spending. That’s no longer the case, said John Burford, investment portfolio manager at The International Bank of Miami.
“Any time consumers are suffering reductions in their wealth, they’re sensitive to that,” Burford said.
While the housing slump and bad credit Florida mortgage crisis have hit hard in the Sunshine State, the rest of the U.S. isn’t feeling the real estate slowdown as acutely.
Nationally, the median existing-home price rose 0.3 percent, the National Association of Realtors said, in contrast to Florida’s price fall.
The Conference Board’s national index jumped from 105.3 last month, and economists had expected the measure to remain at that level.
“An improvement in business conditions and the job market has lifted consumers’ spirits in July,” said Lynn Franco, director of The Conference Board Consumer Research Center.
“This rebound in consumer confidence suggests economic activity may gather a little momentum in the coming months.”
Economists watch consumer confidence closely, because consumer spending accounts for two-thirds of U.S. economic activity.
However, economists also warn of a disconnect between confidence indices and actual consumer spending.
Even as the national confidence index rose, consumers took a shopping break in June, boosting their spending at the slowest pace in nine months.
It said consumer spending edged up by just 0.1 percent. That marked a pullback from May’s brisk 0.6 percent rise.
SOURCE: Palm Beach Post
