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U.S. consumer sentiment sags in June but expectations for the future improve, according to RBC CASH Index

Decline in consumer confidence ends three-month rally

NEW YORK, June 11, 2009 — Consumers' economic enthusiasm faded this month as the jobless rate reached a 26-year high, gas pump prices climbed almost daily and the initial fervor for the government's economic remedies waned, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. Led by a sharp drop in consumers' excitement about current economic conditions, the RBC CASH Index for June 2009 stands at 34.3, an 8.7 point decline from May's 43.0 reading, but nearly 33 points above the all-time low of 1.6 observed in February 2009.

"The June reading of the RBC CASH Index suggest that consumers are disappointed by the recent spate of bad news," said RBC Capital Markets Managing Director Larry Miller. "However, consumer expectations continue to show improvement."

Despite current financial woes, the report found that increasing numbers of Americans are starting to believe the worst is behind them. Expectations regarding personal economic security have held steady since May and consumer pessimism also remains fairly low with only 14 per cent of Americans saying they expect their personal financial situation to weaken over the next six months.

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. 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 1,000 U.S. adults polled from June 4-8, 2009, by survey-based research company Ipsos Public Affairs. The margin of error was ±3.1 per cent.

Highlights of the survey results include:

  • Increased prices at the pump, spent tax refunds, continued job losses and prolonged economic instability drove the RBC Current Conditions Index down nearly 50 per cent in June to a reading of 23.8, compared to 45 last month. This month's reading is the largest single drop in the index since the start of the recession and erases most of the gains posted in April and May. The decline in the index is primarily driven by a downshift in consumers' attitudes about the current strength of their local economy and their worries about their current financial situation. This month, 45 per cent of consumers view their local economy as weak, up from 39 per cent in May. Coinciding with the weak local economy, the share of consumers reporting that their personal finances are strong dropped to 19 per cent in June from 25 per cent last month.

  • Consumers' weakening financial conditions and their discomfort with investing and making major purchases also drove down the RBC Investment Index. After dropping 15.2 points this month, the index stands at 34.4, compared to 49.6 in May. More than six in ten Americans (61 per cent) report they are less confident in their ability to make investments for the future, including retirement and education, than they were six months ago (an increase from 59 per cent last month).

  • With the unemployment rate reaching 9.4 per cent, the RBC Jobs Index slid to 46.7 in June, down from May's 54.4 level. The decline this month essentially erases the gains seen in May and may be a correction for a premature increase in confidence. Consumers' concerns were fed by increased pessimism about job security. This month, more than two in three Americans (67 per cent) say they are less confident about their personal job security now than they were six months ago, compared to 61 per cent in May.

  • The RBC Expectations Index rebounded this month, increasing 6.9 points to 40.9, compared to 34.0 in May. This is the first time consumer expectations have shown improvement over four consecutive months since the launch of the index in 2002. Consumer expectations regarding the health of the local economy improved slightly in June as 37 per cent said they believe their local economy will be stronger six months from now, compared to 36 per cent last month. In addition, the proportion of consumers who expect their local economy to be weaker in six months dropped to 18 per cent this month from 20 per cent in May.

The entire RBC CASH Index report can be viewed at: www.rbc.com/newsroom/rbc-cash-index.html.

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Loretta A. Healy, The Hubbell Group, Inc., (781) 878-8882
Kevin Foster, RBC, (212) 428-6902


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