"The magnitude in the drop of consumer confidence is not surprising given the rocky economic ride consumers are experiencing," said T. J. Marta, Economic and Fixed Income Strategist for RBC Capital Markets. "Americans have a dim view of their current financial situation and an even bleaker view of their future prospects. Although some of the factors weighing on consumers could dissipate in coming weeks, the decline in confidence is consistent with our view that U.S. economic growth will moderate through the remainder of the year."
Consumers' economic outlook dropped sharply during the past month, as seen in the RBC Expectations Index, which declined nearly 30 points to 14.4 compared to 43.9 in August. Expectations about job loss grew gloomier as only 49 per cent of consumers reported that it is unlikely they or someone they know will lose their job in the next six months, down from 56 per cent last month. Worries over prospects for the local economy also increased, with 23 per cent of Americans expecting their local economy to be weaker in six months, compared to 17 per cent in August. The only bright spot is that consumers' expectations about their personal finances held steady. More than one-third (36 per cent) reported they believe their personal finances will be stronger in six months, compared to 35 per cent in August.
Increased pessimism about job security combined with more personal job loss drove the RBC Jobs Index down nearly 11 points to 113.6, its lowest level of 2007. Forty-five per cent of Americans reported feeling less confident about their job security, up five points from last month. Personal job loss experience in September increased by 3 points, with 33 per cent of consumers reporting job loss in their immediate circle compared to 30 per cent in August.
The RBC Current Conditions Index slid more than 15 points in September, down to 90.5, compared to 105.6 in August. Negative views of the current state of the economy outweigh positive views, with one in three Americans (31 per cent) rating their local economy as weak, considerably more than the 19 per cent who rate their local economy as strong. Consumers' comfort level for making household purchases fell to 35 per cent in September from 37 per cent last month, and ratings of current personal finances also declined, with 27 per cent of Americans rating their current financial situation as weak, compared to 23 per cent in August.
As consumers' views of both the current economy and their future prospects darken, they are less confident of their ability to make investments or major purchases. The RBC Investment Index declined almost 10 points to 88.3 this month, compared to 97.9 in August. Consumers' investment confidence declined on all measures with the largest decline coming from confidence in investing for the future. In September, 44 per cent of Americans reported they are less confident in their ability to invest in the future, compared to only 37 per cent in August.
