Crisis Taking Toll on U.S. Consumer Confidence, RBC Survey Shows

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In its largest single monthly decline, RBC's Consumer Attitudes and Spending by Household (CASH) Index showed the economic crisis is driving down consumer confidence in the U.S.

The index dropped 32 points in October, the largest single-month decline since the index's inception in January 2002. The index now stands at 37.0, down significantly from the 69.2 in September.

"The dramatic upswing in consumer sentiment last month stemming from declining energy prices has reversed just as suddenly. In the past month, Americans have been confronted by a worsening global credit crisis, a plummeting stock market, rising unemployment and continued housing price declines," said T.J. Marta, economic and fixed income strategist for RBC Capital Markets.

"We may be entering a period of manic-depression for consumers, with mood swings dictated by the latest good or bad news."

The expectations component found consumers' economic outlook deteriorated sharply in October, falling to 5.1 from 76.3 in September. Meanwhile, the number of Americans who think their personal financial situation will weaken over the next six month doubled to 14% in October.

The current conditions index shows consumers remain "shell-shocked" over current economic conditions, the report said, evidenced by the 17.2-point drop to 38.0 in October. The report said the decline was driven by a drop in Americans' comfort level for making major purchases or investments, and in their feelings about job security.

The jobs index also fell sharply, dropping 17 points to 78.8 - a new all-time low for the index. "Americans' confidence regarding overall job security declined this month, and expectations about personal job loss experience increased," the report said.

The survey also found that more than 6 in 10 Americans, or 62%, report they are less confident in their ability to save and invest this month, compared to 51% in September.

The RBC CASH Index is a monthly national survey of consumer attitudes and is composed of four sub-indexes: 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.

By Stephen Huebl and edited by Nancy Girgis
©CEP News Ltd. 2008