Consumer sentiment reached a six-year low this month as Americans continue to be rocked by increasing job losses, poor holiday shopping reports and the inability of the government and the private sector to stabilize the economy, according to the most recent results of the RBC CASH Index.
As a result of these worsening conditions, the overall RBC CASH (Consumer Attitudes and Spending by Household) Index stands at 13.3 for January 2009, down slightly from 15.3 in December 2008. However, the poll, which was conducted a week before President Obama’s inauguration, showed that the slide in consumer confidence is being offset somewhat by an increase in expectations for the new US administration.
“Consumer sentiment remains weighed down by concerns about the economy, people’s wealth in terms of their home equity and 401(k) values, and the rising prospects of long-term unemployment,” said T.J. Marta, economic and fixed income strategist for RBC Capital Markets. “Despite this downcast mood, the tick higher in expectations suggests hope for the future under the new administration, although the outlook is clearly cautious.”
Highlights of the survey:
- With December unemployment hitting 7.2%, the highest since the early 1990s, the RBC Jobs Index saw an incremental drop of nearly 4 points in January to 61.8, compared with 65.6 last month, and a new all-time low. Personal job-loss experience has now touched more than half of all Americans, with 53% of consumers saying they or someone in their close circle has lost their job in the past six months because of the economy, up from 50% last month.
- The RBC Expectations Index was the one bright spot, actually improving in January to -11.3 from -21.2. Although still in negative territory, the Index’s improvement may signal rising hope for the future. The improvement may be driven by Americans’ openness to the stimulus proposals coming out of Washington rather than any expectation that local economies will improve quickly: Just 30% of survey respondents believe their local economy will be stronger six months from now, up only slightly from 29% last month.
- The RBC Current Conditions Index dropped to another all-time low in January and currently stands at 8.7, compared with 16.5 last month. Consumers increasingly are feeling the effects of the recession, with more than one-third (37%) saying their personal financial situation is currently weak.
- Americans’ overall opinions regarding investing dipped further this month, setting another all-time low. The RBC Investment Index currently stands at 22.5, down from 31.0 in December. Two-thirds of American consumers (66%) say they are less confident now in their ability to make investments for the future – including retirement and education – than they were six months ago.
“Many consumers appear to be holding their breath to see what the new administration will do to address the struggling economy,” said Marta. “A lack of decisive action or some quick results could negatively affect the economic confidence of the American public, causing it to sink yet further.”
About the index: 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 January 8-13, 2009, by survey-based research company Ipsos Public Affairs.