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RBC CASH Index finds U.S. consumer confidence drops in the
face of rising energy prices and slowing housing market
Increased confidence in job security only bright spot
NEW YORK, August 11, 2006 — Unable to shrug
off the effects of rising energy prices and a slowing housing
market, consumer confidence dropped in August, according to
the most recent results of the RBC CASH (Consumer Attitudes
and Spending by Household) Index, which measured the attitudes
of 1,001 Americans earlier this week. Consumer discontent
is widespread, with the greatest decline occurring in confidence
regarding economic expectations. The only bright spot is consumer
confidence in job security which rebounded this month. As
a result, the RBC CASH Index, released today by RBC Financial
Group, declined to 74.8, compared to 80.1 in July.
"The drop in the overall index to 74.8 extends the downtrend
in place since February, a decline which is consistent with
the rise in energy prices and a slowing in the housing market
during this period," said T.J. Marta, Economic and Fixed
Income Strategist for RBC Capital Markets. "The price
of crude oil, for example, has risen close to $20/bl to a
record $77.03 in recent sessions, and the national average
for a gallon of regular unleaded gas had risen 80 cents to
a record $3.04. Additionally, the rate for a 30-year mortgage
had risen 0.80 per cent to 6.79 per cent during this period,
and while that has fallen in recent weeks to 6.42 per cent,
homeowner affordability has dropped to its lowest level since
1989 and existing home sales continue to fall from their June
2005 peak." Added Marta, "RBC believes that the
U.S. consumer will continue to retrench during the second
half of 2006."
The RBC CASH Index is a monthly national survey of consumer
attitudes on the current and future state of local economies,
personal finance situations, savings and confidence to make
large investments. The Index is composed of four sub-indexes;
RBC Current Conditions Index; RBC Expectations Index; RBC
Investment Index; and, RBC Jobs Index. The Index is benchmarked
to a baseline of 100 assigned at its introduction in January
2002. This month's findings are based on a representative
nationwide sample of 1,001 U. S. adults polled from August
7-9, 2006 by survey-based research company Ipsos Public Affairs.
The margin of error was plus or minus 3.1 per cent. Highlights
of the survey results include:
- Consumers' confidence in the future waned considerably
as the RBC Expectations Index dropped 12 points in August
to 21.8 - the third straight month of declining expectations.
Overall sentiment regarding expectations for local economies
dipped this month, with only one in five (19 per cent) of
Americans believing their local economy will be stronger
six months from now (compared to 24 per cent stronger in
July), not statistically different than the one in five
(21 per cent) who believe the local economy will be weaker
in the near future.
- However, consumer expectations regarding personal financial
situations held steady in August, with nearly four in ten
respondents (37 per cent) saying they expected improvements
in personal financial strength, unchanged from July. In
addition, the number of Americans believing they or someone
they know will be at risk of losing their job due to economic
conditions in the next six months stayed at 15 per cent,
also unchanged from last month.
- The RBC Current Conditions Index for August stands at
92.1, down from the 96.6 observed last month. Most evaluations
of current conditions this month were not statistically
different from July - roughly one in five (21 per cent)
rate their local economy as strong (compared to 23 per cent
in July) and similar proportions rate their personal financial
situation as strong (26 per cent strong in August, unchanged
from last month). Consumers are, however, showing more negative
opinions about their current personal economic conditions.
Americans are less confident in their ability to make a
major purchase like a home or car (53 per cent less comfortable,
compared to 45 per cent less comfortable in July), as well
as other household purchases (48 per cent less comfortable
in August, compared to 41 per cent less comfortable last
month).
- Despite less confidence in the ability to make a major
purchase, Americans are more positive about the strength
of the real estate market in the near future. Nearly four
in ten (38 per cent) think the next 30 days would be a good
time to buy real estate, compared to 35 per cent in July.
- Consumer sentiment toward the investment climate took
a downward turn this month, resulting in a six-point drop
in the RBC Investment Index, which stands at 83.2, compared
to 89.6 in July. While Americans' overall confidence in
their ability to invest in the future held steady, with
41 per cent reporting they are more confident in August,
compared to 42 per cent more confident in July, their attitudes
toward making major purchases dropped considerably as only
28 per cent said they were more comfortable this month,
compared to 35 per cent in July.
- Despite widespread discontent, consumer confidence regarding
job security recovered somewhat this month from a seven-point
drop in July. The RBC Jobs Index for August stands at 120.5,
compared to 116.9 in July 2006. Reports of direct job loss
experience decreased this month, with fewer than one third
(30 per cent) of Americans reporting that they or someone
they know personally has lost their job as a result of economic
conditions in the past six months (compared to 34 per cent
in July). Looking forward, those believing direct job loss
experience is unlikely in the next six months held steady
at 53 per cent, unchanged from July.
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. In the United
States, RBC provides personal and commercial banking, insurance,
full-service brokerage and corporate and investment banking
services to about 1.5 million clients through RBC Centura,
RBC Insurance, RBC Liberty Insurance, RBC Dain Rauscher and
RBC Capital Markets. The company employs approximately 70,000
full and part-time employees 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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Contacts:
Loretta Healy, The Hubbell Group, Inc. (781) 878-8882
Kevin Foster, RBC Capital Markets, (212) 428-6902
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