"This month's reading indicates a very poor mood among consumers who are confronted with news about a housing recession, falling stock prices, problems in the banking system and a deteriorating overall economic environment," said T. J. Marta, Economic and Fixed Income Strategist for RBC Capital Markets. "With consumer spending driving 70 per cent of the U.S. economy, a pullback in spending increases the risk that the country could tip into recession."
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. Each 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 1,006 U.S. adults polled from February 4-6, 2008, 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:
- The RBC Current Conditions Index plunged more than 15 points in February, down to 63.6, compared to 78.9 in January. Attitudes toward the current state of the economy remained statistically unchanged, with 35 per cent of consumers rating the local economy as weak, compared to 32 per cent rating it weak in January. Most of February's steep decline is due to a significant weakening in people's evaluations of their own finances and reduced confidence in making household purchases. Currently, one in three American consumers (31 per cent) rate their personal finances as weak (up from 27 per cent in January).
- Consumers' economic outlook remained in negative territory during the past month, as measured by the RBC Expectations Index, which climbed slightly to - 7.0, compared to - 8.2 in January. However, while confidence in the future of the economy has stabilized somewhat, it remains near the record low of - 13.5 in the aftermath of Hurricane Katrina in September 2005. Future expectations for personal finances remain low, with only one in three consumers (33 per cent) expecting their personal finances to be stronger in six months. However, this was offset slightly by an increase in the number of consumers who think their local economy will be better in six months (23 per cent in february, versus 19 per cent in January).
- Americans' muted view of their prospects is reflected in their attitude towards making investments or major purchases. The RBC Investment Index declined more than 13 points to this month, to 62.6, down sharply from 76.3 in January. Consumers are less confident about making investments, with more than half (52 per cent) saying they are less confident about investing for the future, versus 48 per cent in January. In addition, only 22 per cent of consumers say they are more comfortable today making a major purchase, such as a house or car, compared to 28 per cent in January. One seeming inconsistency actually underscores the loss of consumer confidence: Two in five consumers (41 per cent) think that the next 30 days will be a good time to buy real estate, up from 36 per cent in January. This is likely because consumers think that a soft housing market offers bargains, even if they themselves are reluctant to buy.
- The RBC Jobs Index for February stands at 101.3, compared to 106.9 in January. Despite the decline, which drops confidence in job security to the lowest level since September 2003, Americans' confidence in their jobs remains comparatively strong. The decline was fed by an increase in the number of consumers who expect that they or someone they know personally will lose their job in the next six months, to 24 per cent in February from 18 per cent in January.
