Consumer sentiment slumps in June, resuming a downward trend, according to RBC CASH Index

Americans’ confidence in current economic conditions slumped this month, resuming a downward trend after a brief resurgence in May, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. The survey, which measured the attitudes of 1,000 Americans earlier this week, found respondents much less confident about their current situation and only mildly optimistic about their future prospects. As a result of these mixed views, the overall RBC CASH Index, released today by RBC, stands at 81.4 for June 2007, six points below May’s 87.1 level.

“In spite of continued jobs growth, U.S. consumer sentiment is weighed down by several factors,” said T. J. Marta, Economic and Fixed Income strategist for RBC Capital Markets. “Mortgage rates have spiked to their highest level since last July, gasoline prices remain above $3 per gallon going into the driving season and equity prices have begun to waver after two months of gains.”

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 June 4-6, 2007, 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:

Americans’ ratings of their current personal finances dropped in June, with less than one-quarter (23 per cent) saying their personal finances are “strong,” down from 31 per cent in May. By comparison, 27 per cent of consumers rate their personal finances as “weak.” In addition, consumers said they were less comfortable making major purchases, such as a home or a car. The combination of these more negative attitudes caused the RBC Current Conditions Index to sink to 96.8 in June, down more than 16 points from 113.2 in May.


Consumers’ overall opinions regarding investing also fell significantly this month. The RBC Investment Index stands at 86.1, down 21 points from May’s level of 107.5. The decline is due to consumers’ decreasing confidence in investing in the stock market and real estate.


Although consumers feel much less positively about the present, their confidence in future economic conditions improved slightly this month, breaking a four-month string of declining expectations about the future. The strengthened opinions of future conditions produced an increase in the RBC Expectations Index, which rose nearly eight points to 32.2, up from 24.3 in May.


Confidence in job security remained the strongest facet of consumer sentiment this month. The RBC Jobs Index for June stands at 126.9, up slightly from 123.8 in May. Just 14 per cent of consumers expect that they or someone they know will lose their jobs in the next six months, down from 18 per cent in May.
“Consumers’ weakening confidence in current conditions and their investing prospects are consistent with the fact that just one in five Americans thinks that the country is headed in the right direction,” added Marta. “While consumers are optimistic about the future and their personal job security, the return to declining overall consumer confidence at the start of summer may be particularly troubling for the travel industry and retailers that rely on vacationers for a significant part of their annual business.”

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