U.S. consumer sentiment rebounds in August after two-month slide, according to RBC CASH Index
After sliding for most of 2007, consumers’ views about current and future economic conditions rebounded this month, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index, which measured the attitudes of 1,003 Americans earlier this week. As a result, the overall RBC CASH Index stands at 89.3 for August 2007. This is 13 points above July’s 76.1 level and its highest level since March 2007.
The improving sentiment comes in spite of a volatile stock market that has Wall Street calling for the Federal Reserve to calm investors, concerns about credit, recent increases in the jobless rate and lackluster July retail sales. Overall consumer sentiment shows a reduction in consumer pessimism after increasing negativity in June and July. In addition to the overall increase in consumer confidence, strong gains were made across all facets of consumer sentiment, including assessments of current conditions, expectations for the future, investing and job security.
“Consumer confidence rebounded this month, likely supported by ongoing tightness in the jobs market and declines in both the price of gasoline and mortgage rates,” said T. J. Marta, Economic and Fixed Income Strategist for RBC Capital Markets. “However, the rise in the investment index might prove short-lived if current market volatility persist.”
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 1,003 U.S. adults polled from August 6-8, 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:
In August, the RBC Job Index rose nearly eight points to 124.5, compared to 116.8 in July. The biggest reason for the improvement was a decrease in personal job loss experience, with only one in three respondents (30 per cent) reporting job losses (compared to 34 per cent last month). In addition, the share of consumers reporting no personal job loss experience rose to 70 per cent in August, up from 65 per cent in July.
Consumers’ confidence in the investment climate rose at a greater rate than the small decrease experienced in July. The RBC Investment Index climbed more than 14 points, and stands at 97.9, up from 83.6. Forty-three per cent of consumers reported they are more confident in their ability to invest, compared to 40 per cent in July.
Expectations regarding future economic conditions also increased sharply in August. The RBC Expectations Index more than doubled, climbing to 43.9 from its 23.1 level in July, the lowest level in 2007. Expectations regarding potential future job loss improved significantly, with 56 per cent of consumers reporting it is unlikely they or someone they know will lose their job in the next six months (versus 50 per cent in July). Expectations for personal finances also held steady.
The RBC Current Conditions Index improved markedly in August to 105.6, compared to 95.8 in July. Americans’ assessments of current local economic conditions rose this month with 22 per cent rating their local economy as strong, compared to 20 per cent last month. Ratings of current personal finances improved slightly in August, with one in four consumers (26 per cent) rating their current financial situation as strong, compared to 24 per cent in July.
While overall optimism did not significantly increase, the decreases in negative and pessimistic attitudes were substantial enough to buoy the overall RBC CASH Index in August. However, reduced pessimism cannot sustain continued improvements in consumer sentiment. Without increases in positive assessments, consumer confidence could easily revert to the downward trend observed throughout 2007.
The entire RBC CASH Index report can be viewed at: www.rbc.com/newsroom/rbc-cash-index.html.
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