"Consumers remain relatively positive about their current conditions, likely due to the rising stock market and income gains," said T. J. Marta, Economic and Fixed Income Strategist for RBC Capital Markets. "However, their longer-term outlook has weakened, probably because of fears related to rising gasoline prices, the sagging housing market and a softening in perceptions about the jobs outlook."
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 May 7-9, 2007, by survey-based research company Ipsos Public Affairs. The margin of error was plus or minus 3.1 percent.
Highlights of the survey results include:
- Americans' ratings of their current personal finances strengthened in May, with nearly a third (31 percent) of consumers saying their personal finances are strong, up from 26 percent in April. In addition, consumers indicated greater comfort with making major purchases. The combination of these more positive attitudes caused the RBC Current Conditions Index to jump to 113.2 in May from 99.0 last month.
- Although consumers feel much more positively about the present, their confidence in the future weakened again this month as a fifth (21 percent) of survey respondents expected their local economy to be weaker in six months, compared to about the same number (20 percent) who believe it will be stronger.
- This is the first time since August 2006 that the share of respondents believing the economy will weaken exceeded the number expecting it to strengthen. The softening of opinions regarding future conditions produced a significant decline in the RBC Expectations Index, which decreased 17 points to 24.3, down from 41.7 in April, the fourth consecutive month of declining confidence in the future.
- Although consumers' expectations of their future economic prospects are darkening, their overall opinions regarding investing improved significantly this month. The RBC Investment Index stands at 107.5, up 15 points from April's level of 92.3. The jump results from the combination of small shifts in investing confidence combined with much-improved views of current personal finances.
- Confidence in job security is traditionally one of the most robust and resilient indicators of consumer confidence, and remained the strongest facet of consumer sentiment this month. The RBC Jobs Index for May stands at 123.8, down slightly from 126.4 in April. Consumers hold a split view of job security: Compared to six months ago, consumers are more pessimistic about job security. However, personal job loss experience in May remained unchanged.
The steep decline in future expectations is not surprising, considering only one-quarter of Americans believe that the country is headed in the right direction. Even job security, traditionally a stronghold of confidence, dipped slightly in May. However, the stabilization of consumer sentiment in May 2007 after months of softening confidence potentially points toward continued improvement going forward.
