While confidence is higher than projected, a stumbling economy may burst hopes.
By Times Staff and Wire Reports
Published June 25, 2003
NEW YORK - Consumers are feeling increasingly confident in the future health of the economy, but that optimism is tempered by doubts about current business conditions, a private research group reports.
Floridians countered the national trend, however, with consumer confidence numbers in the state rising in June for the third straight month, according to economists at the University of Florida.
The Conference Board in New York said Tuesday that its national Consumer Confidence Index edged back to 83.5 in June from a revised 83.6 in May, after two consecutive months of increases. Still, the reading was better than analysts' projected reading of 82.
Economists called the report modestly positive and said it shows that consumers, continuing to exhibit the optimism that followed the end of the war in Iraq and buoyed by reports of coming tax cuts, see better times ahead.
"It just shows that the consumer sector may continue to be a pillar and foundation for growth in the overall economy going forward," said Patrick Fearon, an economist with A.G. Edwards & Sons Inc. in St. Louis.
Fearon said a disparity between consumers' assessment of current conditions and more positive future expectations often signals coming improvements in the economy.
"It's obviously good news about consumer spending, not blockbuster numbers, but it does indicate firm underpinning for the economy. It is good for second-half consumer spending growth," said Sherry Cooper, chief economist for BMO Nesbitt Burns in Chicago.
The UF survey showed slightly more Floridians were optimistic that both their personal situation and the national economy will improve over the next 12 months. But respondents were less optimistic about the long term, with rising expectations that economic conditions will worsen over the next five years.
UF said the short-term optimism is rooted in the ease of buying big-ticket items because of extremely low interest rates for homes, cars and credit cards.
Chris McCarty, director of UF's survey research center at the Bureau of Economic and Business Research, said Floridians' optimism about their own finances was somewhat unexpected. After all, the country is in the midst of rising unemployment, a record number of personal bankruptcies and record-high consumer debt.
Florida, with its service-oriented economy, may not be suffering as much as manufacturing-orienting states that have been hard hit by layoffs. And there is some belief the South is ahead in the recovery.
Still, McCarty thinks any renewed optimism in Florida will be short-lived without a dramatic improvement in the job market.
"If the current trend continues into the fall," he said, "eventually even Floridians will respond with lower levels of confidence."
The national confidence index is watched closely by economists because consumer spending accounts for two-thirds of the domestic economy. Consumers' willingness to continue their purchases have powered the economy through the current downturn, even as businesses have sharply limited spending.
"The recent turnaround in the stock market and an easing in unemployment claims should keep consumer expectations at current levels and may signal more favorable economic times ahead," said Lynn Franco, director of the Conference Board's Consumer Research Center.
On Wall Street, stocks ended the day mixed. The Dow Jones Industrial Average was up 37 points to 9,110, while the Nasdaq composite index was down 5 points to 1,606.
Franco said Tuesday's report indicates that consumers are mixed in their assessment of business and labor market conditions.
Reflecting that, the report's present situation index declined to 64.9 in June from 67.3 in May. The number of consumers who say business conditions are good and jobs are plentiful both fell.
But the report's measure of consumer expectations for the next six months rose to 95.9, up from 94.5 in May, offsetting the declines in optimism about the current economy.
Those who say they expect improving business conditions rose to 23.9 percent from 22.8 percent, while the number expecting conditions to worsen fell.
- Times staff writer Jeff Harrington contributed to this report, which used information from the Associated Press.
