Florida’s consumer confidence dropped by one point in February to 74, as a result of the delayed effect of the expiring payroll tax cut, according to a monthly University of Florida survey.
But, consumers’ outlook could turn even gloomier if massive spending cuts from sequestration take place in March, said Chris McCarthy, director of UF’s Survey Research Center in the Bureau of Economic and Business Research.
Two years ago, the White House and Congress tried to stimulate the economy by temporarily cutting the payroll tax that workers pay for Social Security from 6.2 to 4.2 percent. “This put money directly in the pockets of consumers, which had a noticeable effect on consumer spending,” McCarty said.
However, the cuts expired last month as part of the fiscal cliff negotiation. “It took a month for the increased withholding to show up in people’s paychecks, so the effect was delayed,” McCarty said.
Nonetheless, the UF study reveals that most consumers, and particularly seniors, are more positive than they were last month about their personal finances.
However, respondents are more pessimistic about the future. Their expectations for the U.S. economy over the coming year fell four points to 72, but their faith in the nation’s economic health over the next five years fell even further, dipping seven points to 69.
McCarthy said, consumers are now less concerned about the expiration of the payroll tax and are more concerned about the effects of sequestration that is expected to take effect March 1st.
The worst effects of automatic budget cuts are likely to be felt in the metro area around Washington, D.C., but Florida will not escape.
The UF survey was conducted during the period Feb 13-21 and reflects the responses of 406 individuals across Florida.
