One-in-three U.S. consumers have already cut spending because of rising gas prices: RBC Consumer Outlook Index
Consumer confidence declines as worries mount on rising fuel and food prices, mideast instability
NEW YORK, March 4, 2011 — One-in-three
U.S. consumers (32 per cent) has already significantly reduced
discretionary spending because of the increase of rising gas
prices, according to the monthly RBC Consumer Outlook Index.
With the national average price at approximately $3.20 per
gallon at the time this survey was conducted (February 25-28,
2011) another one-in-five (18 per cent) say they would reduce
spending if gas prices climb to $3.75 per gallon. Four-in-10
(41 per cent) place their pain threshold at $4.00 per gallon
or more.
"There has been quite a lot of debate about the impact
of rising gasoline prices on consumption in general,"
said RBC Capital Markets chief U.S. economist Tom Porcelli.
"Specifically, the conversation focuses on what particular
price level of gasoline would lead to a shift away from discretionary
spending. The RBC survey finds that this level has already
been breached for 32 per cent of consumers, and is within
range for another 18 per cent. Somewhat encouragingly, however,
is that 40 per cent of Americans place their threshold at
or north of $4 per gallon."
Consumer confidence for March sank for a third straight month,
with the RBC Consumer Outlook Index sliding to 42.5, down
2 points from February's 44.5. The March decline followed
smaller decreases the two preceding months, as consumers were
further affected by climbing fuel and food prices, instability
in the Middle East and budget battles in Washington, D.C.
"What really stands out to us is worry about the future,"
said Porcelli. "The geopolitical issues of recent weeks
are seeping into expectations about markets and respondents'
financial position. The number of people who expect the value
of their investments to 'get worse' rose to the highest level
in four months. The erosion in personal finances has translated
into people thinking they will have less to spend on discretionary
items, and that number rose to the highest level in at least
a year."
The survey found growing concern about inflation, with consumers
expecting that higher raw material costs will drive even greater
price increases in the sectors already giving them the most
trouble. Nine-in-10 consumers (93 per cent) expect to see
higher oil and gasoline prices and 90 per cent expect to see
higher food and grocery costs. Consumers had lower inflation
expectations for durable goods, with 66 per cent expecting
higher prices for clothing, 56 per cent for automobiles and
52 per cent for appliances.
"Aside from geopolitical fears, we believe these results
also reflect increased concern about rising prices,"
said Porcelli. "While the overwhelming majority expects
prices will rise for energy and food, these are not the only
areas of concern. Our survey suggests significant worry about
prices exists in clothing, autos and appliances. This phenomenon
is not limited to the here-and-now, either. Indeed, those
expecting prices will go up over the next five years also
jumped significantly."
This month's decline in the RBC Consumer Outlook Index was
reflected in weakening across all five of the sub-indexes.
The deteriorating sentiment is driven primarily by the Current
Conditions Sub-Index, which dropped to 32.4 in March
from 34.4 last month. Nearly half (47 per cent) of Americans
think their current financial situation is weak, the highest
level since July 2010.
In line with the Current Conditions Sub-Index, the Expectations
Sub-Index showed the biggest drop, falling to 53.6
in March from 56.8 in February, after having actually improved
in January, and the Investment
Confidence Sub-Index, which had held steady the past
couple of months, declined to 36.3 from 39.0 last month. Nearly
two-in-five Americans (39 per cent) think the next month will
be a bad time to invest in the stock market, up sharply from
29 per cent last month, and half of Americans (51 per cent)
are now less confident of their ability to invest in the future.
Although the official unemployment numbers have declined
recently, consumers continue to be concerned about the job
market. The Jobs
Sub-Index edged down this month to 50.1 from February's
50.9.
The decline in consumer confidence was mirrored by broader
worries, with two-thirds of Americans (67 per cent) saying
the country is on the wrong track, up from 60 per cent last
month, the 11th-consecutive month at or above the 60 per cent
mark. Underscoring consumer anxiety about the future, nearly
one in three Americans (31 per cent) think that the U.S. economy
and their own financial situation will get worse in the next
year or so, the highest negative sentiment expressed by consumers
in more than a year.
About The RBC Consumer Outlook Index
The RBC
U.S. Consumer Outlook Index provides the most up-to-date
and comprehensive outlook of U.S. consumers based on data
collected from interviews with a nationally representative
sample of more than 1,000 U.S. adults conducted over a multi-day
polling period each month by Ipsos, the world's second-largest
market and opinion research firm. The results in this news
release reflect some of the findings of the Ipsos poll of
1,004 U.S. adults conducted February 25-28, 2011. The RBC
Consumer Outlook Index is released within 36 hours after the
U.S. online panel members are interviewed. Weighting is employed
to balance demographics and ensure that the survey sample's
composition reflects that of the U.S. adult population according
to Census data and to provide results intended to approximate
the sample universe.
Contacts:
Kait Conetta, RBC Capital Markets,
kait.conetta@rbc.com,
(212) 428-6409
Greg Hamrock, Hubbell Group,
ghamrock@hubbellgroup.com,
(781) 878-8882
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