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Consumer confidence drops to lowest level ever on recession
fears, according to RBC CASH Index
NEW YORK, February 8, 2008 — Recent comments
by President Bush about signs of weakness in the domestic
economy, further rate cuts by the Federal Reserve and poor
jobs data have taken a toll on consumer confidence. Consumer
sentiment as measured by the latest RBC CASH (Consumer Attitudes
and Spending by Household) Index has dropped to the lowest
levels since the CASH Index was created six years ago. The
overall RBC CASH Index, released today by RBC, stands at 48.5
for February 2008, almost eight points below January's 56.3
level.
Continuing a downward trend that has persisted through the
last year, consumer sentiment fell across the board, driven
especially by declining confidence in current conditions and
growing worries about job security and investing, according
to the survey of 1,006 Americans taken earlier this week.
"This month's reading indicates a very poor mood among
consumers who are confronted with news about a housing recession,
falling stock prices, problems in the banking system and a
deteriorating overall economic environment," said T.
J. Marta, Economic and Fixed Income Strategist for RBC Capital
Markets. "With consumer spending driving 70 per cent
of the U.S. economy, a pullback in spending increases the
risk that the country could tip into recession."
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-indices:
RBC Current Conditions Index; RBC Expectations Index; RBC
Investment Index; and, RBC Jobs Index. Each 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 1,006 U.S. adults polled from February
4-6, 2008, 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:
- The RBC Current Conditions Index plunged
more than 15 points in February, down to 63.6, compared
to 78.9 in January. Attitudes toward the current state of
the economy remained statistically unchanged, with 35 per
cent of consumers rating the local economy as weak, compared
to 32 per cent rating it weak in January. Most of February's
steep decline is due to a significant weakening in people's
evaluations of their own finances and reduced confidence
in making household purchases. Currently, one in three American
consumers (31 per cent) rate their personal finances as
weak (up from 27 per cent in January).
- Consumers' economic outlook remained in negative territory
during the past month, as measured by the RBC Expectations
Index, which climbed slightly to - 7.0, compared
to - 8.2 in January. However, while confidence in the future
of the economy has stabilized somewhat, it remains near
the record low of - 13.5 in the aftermath of Hurricane Katrina
in September 2005. Future expectations for personal finances
remain low, with only one in three consumers (33 per cent)
expecting their personal finances to be stronger in six
months. However, this was offset slightly by an increase
in the number of consumers who think their local economy
will be better in six months (23 per cent in February, versus
19 per cent in January).
- Americans' muted view of their prospects is reflected
in their attitude towards making investments or major purchases.
The RBC Investment Index declined more than
13 points to this month, to 62.6, down sharply from 76.3
in January. Consumers are less confident about making investments,
with more than half (52 per cent) saying they are less confident
about investing for the future, versus 48 per cent in January.
In addition, only 22 per cent of consumers say they are
more comfortable today making a major purchase, such as
a house or car, compared to 28 per cent in January. One
seeming inconsistency actually underscores the loss of consumer
confidence: Two in five consumers (41 per cent) think that
the next 30 days will be a good time to buy real estate,
up from 36 per cent in January. This is likely because consumers
think that a soft housing market offers bargains, even if
they themselves are reluctant to buy.
- The RBC Jobs Index for February stands at
101.3, compared to 106.9 in January. Despite the decline,
which drops confidence in job security to the lowest level
since September 2003, Americans' confidence in their jobs
remains comparatively strong. The decline was fed by an
increase in the number of consumers who expect that they
or someone they know personally will lose their job in the
next six months, to 24 per cent in February from 18 per
cent in January.
The complete RBC CASH Index report for February 2008 can
be viewed at: www.rbc.com/newsroom/rbc-cash-index.html.
About RBC
RBC (RY on TSX and NYSE) is Canada's largest bank as measured
by assets and market capitalization and one of North America's
leading diversified financial services companies. In the United
States, RBC provides personal and commercial banking, wealth
management, insurance, corporate and investment banking and
transaction processing services to about two 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 15 million personal, business, public sector and
institutional clients throughout offices in North America
and 36 countries around the world. For more information, please
visit www.rbc.com.
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Contacts:
Mary Mulkerin, The Hubbell Group, Inc., (781) 878-8882
Kevin Foster, RBC Capital Markets, (212) 428-6902
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