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RBC CASH Index finds moderate decline in U.S. consumer confidence
following September exuberance
NEW YORK, October 6, 2006 — The surge in optimism
U.S. consumers felt in September as a result of falling gas
prices abated somewhat this month, 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. Consumers' short-term euphoria did not
translate into longer-term optimism about the state of personal
finances as consumer sentiment dropped nearly 11 points in
October. As a result, the RBC CASH Index, released today by
RBC Financial Group, declined to 83.1 this month, compared
to 93.7 in September and 74.8 in August.
"Despite moderate declines in the overall index and
current conditions sub-index, the figures remain robust,"
said T.J. Marta, Economic and Fixed Income Strategist for
RBC Capital Markets. "Gasoline prices continue to fall,
reaching their lowest level since March, and mortgage rates
have fallen towards their lowest level since January. Additionally,
hourly wages and overall incomes remain strong, and all of
this points to a healthy consumer and a soft landing for the
U.S. economy."
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 October
2-4 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:
- Losing most of the 27-point increase observed in September,
the RBC Current Conditions Index this month
stands at 98.3, down from 118.8 last month. Consumer sentiment
regarding the current state of the local economy and current
personal finances returned to yearly average levels in October,
after hitting a high point in the wake of decreasing gas
prices last month. That exuberance has tempered somewhat
- currently one quarter (24 per cent) of American consumers
rate their local economy as strong, compared to 27 per cent
in September.
- Consumer sentiment on the state of current personal finances
shifted even more, with one quarter (25 per cent) rating
their current personal financial situation as strong (compared
to 33 per cent in September) and one quarter (26 per cent)
rating current finances as weak (compared to 20 per cent
last month). This represents a shift back to 2006 average
levels.
- Driven primarily by the decline in confidence regarding
current finances, consumer sentiment regarding investment
also dipped in October 2006. A slight softening of comfort
in purchasing also contributed to the overall decline in
Americans' investing sentiment. As a result, the RBC
Investment Index for October stands at 87.2, down
nearly 23 points from 110.0 in September. Nearly one third
(32 per cent) of Americans report they are more comfortable
making a major purchase like a car or home in October, compared
to 36 per cent last month. Comfort in making other household
purchases also declined slightly this month, as 38 per cent
of consumers say they are more comfortable making other
household purchases, compared to 42 per cent who said they
felt that way in September.
- However, other aspects of investing confidence showed
more resiliency. Nearly four in ten Americans (38 per cent)
believe the next month will be a good time to buy real estate
(compared to 35 per cent in September ) bringing attitudes
regarding real estate investment to roughly the same as
they were one year ago (40 per cent in October 2005). This
month four in ten consumers (41 per cent) also said they
believe the next month will be a good time to invest in
the stock market (compared to 40 per cent in September).
- Consumer optimism regarding expectations about the future
held steady this month. The RBC Expectations Index
stands at 39.8, compared to 39.4 in September. Overall sentiment
regarding expectations for local economies remained the
same in October as it had last month, with 21 per cent believing
the local economy will be stronger six months from now.
Similarly, expectations for personal finances also held
steady in October, with nearly four in ten Americans (37
per cent) believing their personal financial situation will
be stronger six months from now (compared to 35 per cent
last month).
- Consumer confidence regarding job security held steady
for the second consecutive month. The RBC Jobs Index
for October stands at 119.0, compared to 119.4 in September.
Four in ten (41 per cent) consumers report they are more
confident about current job security than six months ago
(compared to 44 per cent in September 2006), while personal
job loss experience remained unchanged from last month as
one third (33 per cent) of consumers again reported that
they or someone they know personally have lost their job
as the result of economic conditions. Additionally, expectations
regarding future job loss remained low in October, with
only one in five (18 per cent) consumers reporting future
job loss is likely (compared to 19 per cent last month).
While the overall RBC CASH Index, along with
the RBC Current Conditions Index and the RBC
Investment Index, declined this month, consumer confidence
in October is largely a picture of readjustment, rather than
increasing pessimism. "The sharp drop in gas prices in
September created a surge in consumer estimations of current
personal finances and evaluations of the local economy. Now
that lower gas prices have had time to sink in, the excitement
has abated somewhat, and consumer attitudes have returned
to average yearly levels," added Marta.
The entire RBC CASH Index report can be viewed at: www.rbc.com/newsroom/rbc-cash-index.html
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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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