U.S. consumer confidence cools as holiday shopping season heats up, according to RBC CASH Index

NEW YORK, December 8, 2006 — The busiest shopping season of the year is well underway and retailers have dollar signs dancing in their heads, but Americans’ economic enthusiasm has cooled. According to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index, which measured the attitudes of 1,000 Americans earlier this week, consumer confidence dropped more than five points this month. Although Americans’ assessments of job security rose slightly, overall consumer sentiment dropped, as consumers expressed concern about current and future economic conditions, as well as investing. As a result, the RBC CASH Index for December released today by RBC Financial Group, stands at 86.9, compared to 92.4 in November.

The downturn this month breaks a three-year trend of increasing consumer confidence in the month of December, as 2003, 2004 and 2005 all exhibited gains in consumer confidence from November to December. “The dip in consumer confidence is consistent with our view that consumer demand will slow in the coming months,” said T.J. Marta, Economic and Fixed Income Strategist for RBC Capital Markets. “However, the strong jobs environment underpins our forecast that the economy is merely moderating to a sustainable growth rate rather than spiraling into a significant downtrend.”

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 December 4 - 6, 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:

* Consumers’ economic outlook has cooled during the past month, as seen in the RBC Expectations Index, which stands at 55 this month, compared to 60.5 in November when it reached the highest level since January 2005. While expectations for personal finances increased in this month, with four in ten (40 per cent) believing personal finances will be stronger six months from now (compared to 34 per cent in November), the overall expectation for the economy contributed to the decline in this Index.

* The RBC Current Conditions Index for December stands at 95.2, decreasing after gains last month. Currently one quarter (26 per cent) of American consumers rate their local economy as strong (similar to 24 per cent in November). However, the proportion of consumers (24 per cent) rating their current financial situation as strong weakened slightly this month (compared to 27 per cent in November). In addition, this slight drop in ’strong’ evaluations of current finances is coupled with a significant increase in ’weak’ characterizations. Currently more than 29 per cent of Americans rate their personal finances as weak, compared to 24 per cent in November.

This perception of current financial weakness may be troubling news for holiday retailers as ’weak’ characterizations outnumber ’strong’ ones by a statistically significant margin" said Marta.

* Americans are also less confident about their ability to make investments or major purchases. The RBC Investment Index for December stands at 82.5, down nearly ten points from the 92.1 observed last month. Six in ten (61 per cent) Americans believe the next 30 days will be a bad time to buy real estate (compared to 58 per cent in November). Confidence in the stock market declined this month as well, with 53 per cent of respondents indicating the next 30 days will be a bad time to invest in the stock market (compared to 48 per cent in November). Additionally, half of consumers (51 per cent) report they are less comfortable making a major purchase like a home or car, a significant increase compared to the 47 per cent less comfortable in November 2006.

* Job security attitudes edged up this month increasing five points to reach a high for 2006. The RBC Jobs Index for December 2006 stands at 126.5, compared to 121.3 in November. Four in ten (44 per cent) Americans report they are more confident about current job security than six months ago (compared to 43 per cent in November). Direct job loss experience remained unchanged, with one-third (31 per cent) of consumers reporting that they or someone they know personally have lost their job as the result of economic conditions (compared to 32 per cent in November).

The entire RBC CASH Index report can be viewed at: www.rbc.com/newsroom/rbc-cash-index.html

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Kevin Foster

RBC Capital Markets

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