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Consumer confidence plummets in the face of gas price hikes
and credit crunch, according to RBC CASH Index
Expectations for the future nose-dive into negative territory
NEW YORK, November 9, 2007 — U.S. consumer confidence
reached its lowest level in more than two years this month
amid concerns over record-high oil prices, continued trouble
in the housing market and higher inflation, according to the
most recent results of the RBC CASH (Consumer Attitudes and
Spending by Household) Index, which measured the attitudes
of 1,005 Americans this week. Although consumer attitudes
deteriorated across the board, the substantial drop in expectations
contributed heavily to the sizeable decline in the overall
index. As a result, the overall RBC CASH Index for November
2007 stands at 64, down more than 16 points from October's
80.6 level.
"While consumer sentiment has experienced some increases
in confidence over the past few months, November's results
point to the continuation of the overall year-long downward
trend in economic confidence," said T.J. Marta, Economic
and Fixed Income Strategist for RBC Capital Markets. "This
month's consumer sentiment has collapsed to a level similar
to that in the wake of Hurricane Katrina in 2005. Consumers
have much to worry about: Rising energy and food prices, falling
house prices and tightening lending standards. Although we
do not expect a recessionary retrenchment by consumers, we
do expect that economic growth will moderate substantially
in coming months."
The RBC CASH 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 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 1,005 adults polled November 5-7, 2007,
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:
- Americans' economic outlook plunged sharply during the
past month, as seen in the RBC Expectations Index,
which dropped 30 points, to -4.3, the first time the index
hit negative territory since September 2005. The sizeable
downturn in the index is due largely to increased concern
about the strength of the local economy. This month, 27
per cent of consumers reported they believe their local
economy will be weaker six months from now, up from 20 per
cent in October.
- The RBC Current Conditions Index dropped
more than 10 points to 90.3 in November, compared to 101.1
last month. Although Americans' perceptions of current local
economic conditions and personal finances held steady this
month, their assessments related to consumer purchases declined
from October's levels. Fifty-five per cent of consumers
said they were less comfortable making a major purchase
than they were six months ago, up from 50 per cent in October.
- The RBC Jobs Index slid to 111.8, down nearly
11 points from October's 122.5 level due to consumers' negative
view of overall job security coupled with increased personal
job loss experience. This month, nearly half of Americans
(46 per cent) say they are less confident about job security,
up from 40 per cent in October. Additionally, 35 per cent
of Americans reported job loss in their immediate circle
this month, compared to 31 per cent in October.
- Americans' confidence in their ability to make investments
or major purchases also cooled this month, bringing the
RBC Investment Index down nine points to
83.4, compared to 92.5 in October. The number of consumers
reporting they are less confident in investing increased
five points to 46 per cent, up from 41 per cent in October.
Three in five Americans (60 per cent) believe the next 30
days will be a bad time to invest in the stock market, and
a strong majority of consumers (65 per cent) believe the
next month will be a bad time to buy real estate.
The entire RBC CASH Index report can be viewed at: www.rbc.com/newsroom/rbc-cash-index.html.
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Contacts:
Loretta A. Healy, The Hubbell Group, Inc., (781) 878-8882
Kevin Foster, RBC Capital Markets, (212) 428-6902
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