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Dog days: U.S. consumer sentiment flat at summer's end, according to RBC Index

Consumers remain cautious on the economy

NEW YORK, September 3, 2009 — Although consumers' hopes for their local economies and personal finances improved in the past month, the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index rose by only 2.5 points to stand at 40.0 -- up from a 37.5 reading in August. While the Index reached its highest level since May, a close reading of the results finds consumers remaining cautious about economic recovery.

"The top-line RBC Index continues to rise, but consumers clearly remain cautious," said RBC Capital Markets U.S. economist Tom Porcelli. "The headline received a boost from expectations about the future, but the here-and-now 'current conditions' index fell yet again. Given the strong relationship that exists between the current conditions index and consumer spending, this is not an encouraging signal, as the rise in the overall RBC Index should be taken with a grain of salt."

The RBC 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 August 27-31, 2009, by survey-based research company Ipsos Public Affairs. The margin of error was ±3.1 per cent.

Although consumer sentiment reached its highest level since May after a volatile summer, there were mixed results in the RBC Index's four sub-indices, which measure consumers' views of current conditions, their expectations for the future and their confidence in investing and job security. Highlights of the survey results include:

  • After rebounding strongly in August, consumers' expectations regarding future economic conditions continued to improve at a slower rate this month as the RBC Expectations Index for September 2009 climbed to 41.5, up 12.4 points to reach its highest level in 2009. Currently, 38 per cent of consumers believe the economy in their community will be stronger in the next six months while 18 per cent believe it will continue to weaken. Two months ago, consumers were split much more closely on this question, 31 per cent/24 per cent.

  • Confidence in current conditions resumed a slight downward drift, with the RBC Current Conditions Index for September 2009 standing at 33.2, down 3.4 points from the August 36.6 reading. Vacations and back-to-school expenses contributed to a downturn in confidence in personal finances. The percentage of consumers saying their personal financial situation is weak has increased to 37 per cent in September from 32 per cent last month. However, consumers are slightly more confident about their local economy than they were in August. Currently, only 42 per cent of consumers say the local economy is currently weak, an improvement from the 44 per cent who said their local economy was weak last month.

  • The RBC Investment Index slipped 7 points this month to 36.9 from a 43.9 level in August. Confidence in investing is shaky, with just 34 per cent of consumers saying that now is a good time to invest in the markets and 48 per cent recommending investing in real estate. At the same time, the number of consumers who feel confident about investing for the future continues to improve, climbing to 31 per cent this month, from 28 per cent in August.

  • Reported job loss continues to inch downward, and the RBC Jobs Index for September remains near its historical low, essentially holding steady at 53.5, up 0.3 points from the 53.2 observed in August. The most significant influence on confidence in job security continues to be real experiences in job loss: Currently, 63 per cent of consumers say they or someone in their close circle has lost a job in the last six months. However, this marks a decline over the peak job-loss rate of 65 per cent observed in May through July.

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

- 30 -

Loretta A. Healy,
The Hubbell Group, Inc., (781) 878-8882
Kait Conetta,
RBC, (212) 428-6409


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