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Job worries and poor economic expectations cause drop in
consumer confidence, according to RBC INDEX
NEW YORK, January 9, 2006 — Despite strong job
numbers for December, Americans' confidence in the economic
state of the country declined in January, according to the
most recent results of the RBC CASH (Consumer Attitudes and
Spending by Household) Index. This was primarily due to low
expectations in economic performance over the next six months
and increasing fears about job security.
The RBC CASH Index, which is derived from telephone interviews
held with 1,001 individuals across the U.S. this week, stands
at 78.2 for January. This compares to 85.5 for December -
and significantly below the January 2004 level of 106.3. The
RBC Expectations Index for January 2006 tumbled to 33.9, returning
to levels similar to last summer, when gas prices skyrocketed
and the country experienced two gulf coast hurricanes. In
January of 2005 the Expectations Index stood at 79.6.
"The economy has a decent amount of momentum coming
into the New Year, but the weakness in expectations is consistent
with our outlook for slower growth for the second half of
the year," said Vincent Boberski, director of Fixed Income
Research for RBC Dain Rauscher. "The drop in the CASH
Index tells us that the slowdown we expect to see in the second
half of the year may come earlier than forecast."
The RBC Jobs Index for January stands at 106.0, the second
straight decline from a 2005 high of 119.8 in November. Confidence
in job security is traditionally one of the most robust and
resilient indicators of consumer confidence, and it has dipped
marginally, with 37 per cent of Americans reporting they are
more confident about their job security than six months ago
(compared to 39 per cent in December 2005).
However, more Americans are reporting that they or someone
they know personally has lost their job as a result of economic
conditions in the past six months. Currently, 40 per cent
report direct job loss experience (compared to 31 per cent
in December 2005). In addition, more Americans report an increased
likelihood that they or someone they know will lose their
job as a result of economic conditions in the next six months.
"With the latest release of U.S. employment figures,
we see that the economy produced fewer jobs than expected,
and the caution we have regarding the labor market is reflected
in the results of the current RBC Jobs Index," said Boberski.
"While consumers are definitely optimistic about the
current state of the economy and jobs, there is significant
pessimism regarding the future, and current consumer confidence
levels should be viewed with significant caution. The slight
improvements in confidence that we saw last month due to the
holiday season may be fleeting, and confidence may revert
to last year's overall downward trend."
Currently, 19 per cent of respondents expect the economy
in their local area to be weaker six months from now. This
statistic, when combined with the decrease in people who feel
their local economy will strengthen over the next six months
(24 per cent in January, which is down 2 per cent from December
2005), signals a troubling overall picture of economic expectations.
Net expectations (total stronger minus total weaker) have
dropped from +10 in December 2005 to +5 in January 2006.
The RBC Current Conditions Index for January stands at 96.5,
up from 92.8 in December 2005, with two in ten respondents
rating their current local economy as strong, and one-quarter
rating their current financial situation as strong. Confidence
in investment remains unchanged, with the RBC Investment Index
standing at 89.3.
RBC's Consumer Attitudes and Spending by Household Index
is a monthly national survey of consumer attitudes on the
current and future state of local economies, personal financial
situations, savings, and confidence to make large investments.
The Index is benchmarked to the 100 reading assigned in January
2002 when it was first introduced. This month's findings are
based on a representative sample of 1,001 adults polled nationwide
from January 3-5, 2006, by survey-based research company Ipsos
Public Affairs. The entire RBC CASH Index report can be viewed
at www.rbc.com/newsroom/rbc-cash-index.html.
About RBC Financial Group
Royal Bank of Canada (TSX, NYSE: RY) uses the initials RBC
as a prefix for its businesses and operating subsidiaries,
which operate under the master brand name of RBC Financial
Group. Royal Bank of Canada is Canada's largest bank as measured
by market capitalization and assets and is one of North America's
leading diversified financial services companies. It provides
personal and commercial banking, wealth management services,
insurance, corporate and investment banking, and transaction
processing services on a global basis. The company employs
approximately 60,000 people who serve more than 14 million
personal, business and public sector clients through offices
in North America and some 30 countries around the world. For
more information, please visit www.rbc.com.
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Contact:
Vince Boberski, RBC Dain Rauscher, (312) 559-1654
Kevin Foster, RBC Capital Markets, (212) 428-6902
Susan Austin, Hubbell Group, (781) 644-2534
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