November 15, 2007

Oil Prices Shake Consumer Confidence

U.S. consumer confidence reached its lowest level in more than two years amid concerns over record-high oil prices, continued trouble in the housing market and higher inflation, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index, writes MarketingCharts (via MarketingVOX).

The overall RBC CASH Index for November stands at 64, down more than 16 points from October’s 80.6 level.

“This month’s consumer sentiment has collapsed to a level similar to that in the wake of Hurricane Katrina in 2005. Consumers have much to worry about: Rising energy and food prices, falling house prices and tightening lending standards,” said T.J. Marta, Economic and Fixed Income Strategist for RBC Capital Markets.

“Although we do not expect a recessionary retrenchment by consumers, we do expect that economic growth will moderate substantially in coming months.”

The RBC CASH Index is a monthly national survey of consumer attitudes on the current and future state of local economies, personal financial situations, savings and confidence to make large investments. The Index is composed of four sub-indexes: RBC Current Conditions Index; RBC Expectations Index; RBC Investment Index; and, RBC Jobs Index.

Highlights of the survey results:

• Americans’ economic outlook plunged sharply during the past month, as seen in the RBC Expectations Index, which dropped 30 points, to -4.3, the first time the index has hit negative territory since September 2005.
  • The sizeable downturn in the index is due largely to increased concern about the strength of the local economy.
  • This month, 27 percent of consumers reported they believe their local economy will be weaker six months from now, compared with 20 percent saying so in October.
• The RBC Current Conditions Index dropped more than 10 points to 90.3 in November, compared with 101.1 last month.
  • Although Americans’ perceptions of current local economic conditions and personal finances held steady this month, their assessments related to consumer purchases declined from October’s levels.
  • 55 percent of consumers said they were less comfortable making a major purchase than they were six months ago, up from 50 percent in October.
• The RBC Jobs Index slid to 111.8, down nearly 11 points from October’s 122.5 level, due to consumers’ negative view of overall job security coupled with increased personal job loss experience.
  • This month, nearly half of Americans (46 percent) say they are less confident about job security, up from 40 percent in October.
  • Also, 35 percent of Americans reported job loss in their immediate circle this month, compared with 31 percent in October.
• Americans’ confidence in their ability to make investments or major purchases also cooled this month, bringing the RBC Investment Index down nine points to 83.4, compared with 92.5 in October.
  • The number of consumers reporting they are less confident in investing increased five points to 46 percent, up from 41 percent in October.
  • Three in five Americans (60 percent) believe the next 30 days will be a bad time to invest in the stock market.
  • A strong majority of consumers (65 percent) believe the next month will be a bad time to buy real estate.

About the data: The RBC CASH Index is benchmarked to a baseline of 100 assigned at its introduction in January 2002.

This month’s findings hail from a representative nationwide sample of 1,005 adults polled November 5-7, 2007, by survey-based research company Ipsos Public Affairs. The report can be viewed at www.rbc.com/newsroom/rbc-cash-index.html.

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