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U.S. consumer confidence experiences largest single month
decline, as Americans' expectations for the future plummet
according to RBC CASH Index
NEW YORK, October 9, 2008 — The implosion of
Wall Street and the spreading economic crisis have taken a
heavy toll on consumers, driving their confidence back down
after a brief rally the past two months. According to the
most recent results of the RBC CASH (Consumer Attitudes and
Spending by Household) Index, consumer confidence dropped
32 points in October - the largest single-month decline in
overall sentiment since the Index began in January 2002. The
RBC CASH Index currently stands at 37.0 compared to 69.2 in
September, driven down by the sharp decline in consumers'
economic expectations.
"The dramatic upswing in consumer sentiment last month
stemming from declining energy prices has reversed just as
suddenly. In the past month, Americans have been confronted
by a worsening global credit crisis, a plummeting stock market,
rising unemployment and continued housing price declines,"
said T.J. Marta, Economic and Fixed Income strategist for
RBC Capital Markets. "We may be entering a period of
manic-depression for consumers, with mood swings dictated
by the latest good or bad news."
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 October
2 - 6, 2008, by survey-based research company Ipsos Public
Affairs. The margin of error was ±3.1 per cent.
Highlights of the survey results include:
- Consumers' economic outlook deteriorated sharply during
the past month, as seen in the RBC Expectations Index,
which stands at 5.1, a dramatic drop from September's 76.3
level. Although still relatively low, the proportion of
Americans who think their personal financial situation will
weaken over the next six months doubled this month, reaching
14 per cent, compared to 7 per cent in September. The shift
in the Index, however, was mainly due to consumers' increased
pessimism about their local economy. This month, more than
one-quarter of consumers (27 per cent) believe their local
economy will be weaker six months from now, compared to
13 per cent last month. Recent experience demonstrates that
attitudes regarding the future are more volatile and subject
to events-based swings. And although many consumers have
not yet felt additional pressure stemming from the Wall
Street meltdown, the climate of "doom and gloom"
is significant enough to produce a substantial decrease
in the RBC Expectations Index for October
and drive the overall RBC CASH Index in a negative direction.
- Shell-shocked consumers also are clearly uncomfortable
with current economic conditions, as evidenced by the 17.2
drop in the RBC Current Conditions Index to
38.0, compared to 55.2 in September. The decline in the
index is primarily driven by a drop in Americans' comfort
level for making major purchases or investments, and in
their feelings about job security. Sixty-nine per cent of
consumers said they were less comfortable making a major
purchase than they were six months ago, up from 55 per cent
in September. The one bright spot is that Americans' perceptions
of their personal financial situations improved slightly
in October, continuing the slow up tick observed since June's
lows. Currently,
29 per cent of consumers view the current financial situations
as weak, down from 33 per cent in September.
- A clear indication of the depth of consumers' economic
woes is the 17 point drop in the RBC Jobs Index
to 78.8, an all-time low for the RBC Jobs Index
since it began in January 2002. Americans' confidence regarding
overall job security declined this month, and expectations
about personal job loss experience increased. The proportion
of Americans who are more confident about their job security
now than they were six months ago dropped to 23 per cent,
compared to 30 per cent in September. In addition, the share
of consumers who said that it is likely that someone in
their immediate circle will lose their job in the
next six months increased to 28 per cent in October, compared
to 23 per cent last month. And the number of consumers who
are confident that someone close to them will not lose
a job in the next month declined significantly to 35 per
cent from 46 per cent in September.
- Many Americans' watched the value of their investments
evaporate this month, sending the RBC Investment Index
to a reading of 47.0, down from 63.8 in September. More
than six in ten Americans (62 per cent) report they are
less confident in their ability to save and invest this
month, compared to 51 per cent in September.
The entire RBC CASH Index report can be viewed at: www.rbc.com/newsroom/rbc-cash-index.html.
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Contacts:
Loretta A. Healy, The Hubbell Group, Inc., (781) 878-8882
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