GAINESVILLE, Fla. – Jan. 30, 2015 – Consumer sentiment among Floridians rose sharply to 93.3 in January – almost 6 points higher than December's reading, according to a new University of Florida (UF) monthly survey.
However, much of that increase occurred because of recent changes in how UF economists collect survey data, says Chris McCarty, director of UF's Survey Research Center in the Bureau of Economic and Business Research.
In the past, UF researchers used landline telephones to contact survey respondents since the first survey in 1985. "During those years, we minimized the changes to our methodology to maintain an index that reflects changes in consumer attitudes, rather than changes in method," McCarty says.
Today, however, only 53 percent of American households still have a landline, while 89 percent now own cell phones, according to the Center for Disease Control and Prevention. To keep up with this shift, many survey organizations have switched to a cell-phone-only policy to contact respondents. Among them is the University of Michigan, which measures consumer sentiment nationally. It made the change this month.
UF's survey methods align more closely with the Michigan index than with the Conference Board's Consumer Confidence Index that comes out on the last Tuesday of each month.
"Given the University of Michigan's shift in methodology and the start of a new year, we decided now is the time to implement it, too," McCarty says. "It is also a good time because of the relatively stable economic environment both in Florida and nationally."
A move to cell phones means "the sample of respondents more closely matches the demographics of the state," McCarty said. "In addition, we weight the results of our cell phone survey by county, age, sex and minority status, so that the results match the distribution of these same variables in the state."
The overall effect, he said, is an increase in consumer sentiment, as younger respondents are more represented.
That rise occurred in all five indexes that are used to compile a single number in UF's January survey. Respondents' overall perception that their personal finances are better now than a year ago was 78.5, while their expectations of enjoying better personal finances a year from now was 100.7.
Their confidence in U.S. economic conditions over the next year registered 95.5, while their trust in its performance over the next five years was 92.1. Survey takers' perception that now is a good time to buy major household items was 99.5.
The bureau made other changes in how it reports consumer confidence.
"To match the University of Michigan national release, we will now post our results the last Friday of the month rather than the last Tuesday, which the Conference Board – an independent, business-member and research association – uses for its consumer confidence release," McCarty says. "We are also reporting the first decimal rather than rounding the result up or down."
UF economists will also now break the index down by households making more or less than $50,000 a year, rather than using the previous figure of $30,000. The revised number more nearly matches the median income for Florida households, McCarty says.
However, a change in methodology changes only partly explains the dramatic increase in confidence this month.
"Overall, the economy has improved for most consumers and lifted consumer sentiment," McCarty says. Retail sales for the holiday season, for instance, rose 4.7 percent from 2013. Job gains and a declining labor force caused Florida's unemployment rate to dip to 5.6 percent in December, matching the U.S. unemployment figure. The median price for an existing single family home rose to $185,000 in December after a two-month decline, while interest rates remain at historically low levels. The stock market is near record highs.
Gas prices, which plummeted in January, now average just over $2 a gallon and provide a big windfall for consumers. "The last time gas prices were this low was at the end of the Great Recession in 2009 when demand for gas sank," McCarty says. UF economists anticipate gas prices will stay low, and housing prices will remain stable for the near future. They also expect the Federal Reserve to raise short-term interest rates by June, a move that will ultimately translate into higher mortgage and loan rates.
"Until then, we expect consumer sentiment to continue to rise," McCarty predicts.