RBC CASH Index: U.S. Consumer Confidence Increases Sharply
Consumer Sentiment Soars To Seven-Month High
Friday, September 15, 2006
Washington, DC — September’s falling temperatures and declining gas prices have put consumers in a decidedly more optimistic mood, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index, which measured the attitudes of 1,001 Americans this week. Consumer sentiment surged nearly 19 points, as economic attitudes brightened across the board, with the exception of job security, which held steady. As a result, the RBC CASH Index, released today by RBC Financial Group, jumped to 93.7, compared to 74.8 in August.
“The RBC CASH Index has rebounded to its highest level since February, which itself constituted a high since December 2004. The sharp rise was driven by the current conditions index, which reached 118.8, its highest level since data collection began in 2002,” said T.J. Marta, Economic and Fixed Income Strategist for RBC Capital Markets. “The rise likely reflects declines in both gasoline prices and mortgage rates. Overall, the report suggests that the U.S. consumer remains buoyant, with a cautious stance about the future.”
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-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 1,001 U.S. adults polled from September 11-13, 2006 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:
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- The RBC Current Conditions Index increased nearly 27 points, reaching 118.8 in September, compared to 92.1 last month. More than one quarter (27 per cent) of Americans rate their local economy as strong (compared to 21 per cent in August) and one third (33 per cent) rate their personal financial situation as strong (compared to 26 per cent last month). Not only are more Americans feeling confident about their personal financial situation, fewer are feeling pessimistic. Only one in five (20 per cent) rate their current financial situation as weak (compared to 26 per cent in August 2006).
- Americans’ enthusiasm regarding current conditions is mirrored in more positive views regarding expectations about the future. The RBC Expectations Index, which stood at 21.8 in August, increased to 39.4 this month. While only one in five respondents believe (21 per cent) their local economy will be stronger six months from now (holding steady compared to 19 per cent last month), the percentage of Americans believing their local economy will be weaker six months from now dropped four points, to 17 per cent from 21 per cent in August.
- Consumers’ views of the investment climate also showed improvement. The RBC Investment Index increased nearly 27 points this month, reaching 110, compared to 83.2 in August. Americans’ confidence in their ability to invest in the future held steady in September, with 42 per cent reporting they are more confident in their ability to invest in the future, compared to 41 per cent last month. Attitudes toward purchases also improved. Consumers exhibited substantially greater comfort with both major purchases like a home or car (36 per cent more comfortable in September, compared to 28 per cent more comfortable in August) and other household purchases (42 per cent more comfortable in September, compared to 34 per cent more comfortable in last month).
- While Americans report being more comfortable in making purchases now as compared to six months ago, a majority of consumers still believe the next 30 days will be a bad time to make an investment in either the stock market or in real estate. Only one third (35 per cent) of respondents believe the next month will be a good time to invest in real estate, and, while attitudes regarding stock market investments have improved (40 per cent said it would be a good time in September, compared to 34 per cent in August), the majority of Americans said they believe the next month will be a bad time to invest in the stock market.
- Consumer confidence regarding job security held steady in September, dipping only one point. The RBC Jobs Index for September stands at 119.4, compared to 120.5 in August. Direct job loss experience basically held steady in September, with 33 per cent of consumers reporting that they or someone they know personally has lost their job as a result of economic conditions in the past six months (compared to 30 per cent last month). Looking forward, however, those believing that direct job loss experience is likely in the next six months increased to 19 per cent (compared to 15 per cent in August).
Senior Research Manager
Ipsos Public Affairs
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