Consumer confidence spikes unexpectedly

Consumer confidence among Floridians spiked unexpectedly in April to 77, a six-point increase over the revised March reading of 71.

Among the five components making up the index, four rose and one stayed the same. Perceptions of personal finances now compared to a year ago was unchanged at 55, while expectations of personal finances a year from now rose two points to 84.

Expectations of U.S. economic conditions over the next year rose 10 points to 80 while expectations of U.S. economic conditions over the next five years rose six points to 79. The biggest jump was in the component measuring perceptions as to whether it is a good time to buy big-ticket consumer items. That component rose 14 points to 87.

"Florida's consumers have been full of surprises the past several months" said Chris McCarty, the survey director. "Much like the reading for January, this rise in confidence was completely unexpected. Last month Florida broke its all time record for unemployment as 12.3 percent. Yet Floridians are far more optimistic this month than last. Most of the increase is due to the dramatic rise in perceptions of buying conditions. We believe this is a combined effect from the appliance rebate, which pumped $17.5 million into the Florida economy in a matter of days, as well as the tax rebate for both first-time homebuyers and those who have been in a home for the past five years. Those rebates are set to run out at the end of this month and many consumers are rushing to buy homes to qualify for the rebate. The effect of both rebates can be seen in increased sales revenues, and increased sales of existing and new homes. Sales tax revenue going into the general fund was about 1.1 percent over estimates for February, and March sales will likely show a similar trend.

The big question is what happens when the rebates run out in May and the stimulus dollars are spent," McCarty said.

Consumers were also more optimistic than last month about both short and long term economic conditions in the U.S. This reflects a stock market that remains at relatively high levels despite some difficult news, including the possibility that Greece will not get the help it needs to solve its debt problems and charges

by the SEC against Goldman Sachs. Although Florida unemployment is still high, unemployment nationally has remained at 9.7 since January. National retail sales have been unusually strong since the beginning of the year, with particularly strong showings from clothing, electronics and this month from car sales. The overall savings rate was down to 3.1 percent in February, less than half of the 6.4 percent reached in May of last year.

Consumers are clearly optimistic that the U.S. is in recovery and that the economy will at least not get any worse. Therefore some of the spending may be pent up demand from households that were cautious about spending when the recession was at its height and when job losses were on the rise. Although long term unemployment remains a serious problem, in the near term it appears that layoffs have mostly stopped.