US Consumer Confidence Stabilizes after September Nadir

October 8, 2007

This article is included in these additional categories:

Financial Services

Consumer confidence levels improved considerably in October after tumbling to a 16-month low in September, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index, which measured the attitudes of 1,005 Americans earlier this week.

Consumer sentiment stabilized across all surveyed areas, with the biggest increases occurring in the areas of economic expectations and current conditions.

However, this improvement was driven not by significant increases in consumer optimism but by a leveling out of pessimism. As a result, the RBC CASH Index for October 2007 stands at 80.6, up more than nine points from its 71.1 level in September.

“After collapsing in September, the RBC CASH Index rebounded in October, with consumers becoming more positive in the wake of the Fed’s rate cut and the calming of the financial markets,” said T. J. Marta, economic and fixed income strategist for RBC Capital Markets. “However, the lack of a complete recovery in the Index shows that August’s credit crisis has had a profound affect on consumers’ psyches, making them view the financial landscape warily.”

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.

Highlights of the survey results:

  • Americans’ economic expectations increased significantly this month, reversing the free-fall observed in September. The RBC Expectations Index for October rose 11 points to 25.7, compared with 14.4 last month.
    • Job loss expectations were the driving force behind the improvement, as 55% of consumers reported it is unlikely they or someone they know will lose their job in the next six months, up from 49% in September.
    • While expectations for personal finances basically held steady in October, negative expectations for respondents’ local economy leveled off, with only 20% reporting that the economy will be weaker, compared with 23% in September.
  • The RBC Current Conditions Index increased more than 10 points, reaching 101.1 in October, compared with 90.5 last month.
    • Americans’ current perception of their local economy is the main driver behind the improvement as significantly fewer consumers currently have a pessimistic assessment of their local economy.
    • Only one-quarter (26%) of Americans rate their local economy as weak, compared with just under one-third (31%) who felt similarly in September.
  • Consumers’ views of the investment climate also showed improvement this month. The RBC Investment Index for October increased four points to 92.5, after dropping almost 10 points in September to 88.3.
    • Consumer comfort levels for future investments edged up this month, with 41% of consumers reporting they are more confident in their ability to invest in the future, compared with 37% in September.
    • Also, the percentage of Americans reporting they are less confident in investing declined slightly, from 44% in September to 41% now.
  • Americans’ perception of job security rose nearly nine points this month, and as a result, the RBC Jobs Index for October stands at 122.5, compared with September’s 113.6 level, which had been the lowest level for 2007.
    • 41% of Americans reported feeling less confident about their job security, down four points from last month.
    • Personal job loss experience held steady in October, with 31% of consumers reporting job loss in their immediate circle compared with 33% last month.

About the Index: The RBC CASH 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 1,005 US adults polled October 1-3, 2007 by survey-based research company Ipsos Public Affairs.

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