Last month’s gains in consumer enthusiasm faded in June 2009 as the RBC CASH (Consumer Attitudes and Spending by Household) Index fell to 34.3, an 8.7 point decline from May’s 43.0, according to RBC and Ipsos Public Affairs.
Though the index remains 33 points above the all-time low of 1.6 in February 2009, June’s drop corresponds with a waning of the initial fervor over the US government’s economic remedies, an increase in the perception that local economies are weakening, a 26-year high jobless rate, and increasing gas prices.
Despite current financial woes, however, RBC reports that increasing numbers of Americans are starting to believe the worst is behind them. Expectations regarding personal economic security have held steady since May and consumer pessimism also remains fairly low with only 14% of Americans saying they expect their personal financial situation to weaken over the next six months.
Highlights of the survey results:
- Increased prices at the pump, spent tax refunds, continued job losses and prolonged economic instability drove the RBC Current Conditions Index down nearly 50% in June to a reading of 23.8, compared with 45 last month. This month’s reading is the largest single drop in the index since the start of the recession and erases most of the gains posted in April and May.
The decline in the index is primarily driven by a downshift in consumers’ attitudes about the current strength of their local economy and their worries about their current financial situation. This month, 45% of consumers view their local economy as weak, up from 39% in May. Coinciding with the weak local economy, the share of consumers reporting that their personal finances are strong dropped to 19% in June from 25 per cent last month.
- Consumers’ weakening financial conditions and their reluctance to invest and make major purchases also drove down the RBC Investment Index. After dropping 15.2 points this month, the index stands at 34.4, compared with 49.6 in May. More than six in 10 Americans (61%) report they are less confident in their ability to make investments for the future – including retirement and education – than they were six months ago (an increase from 59% last month).
- With the unemployment rate reaching 9.4 per cent, the RBC Jobs Index slid to 46.7 in June, down from May’s 54.4 level. The decline this month erases May gains and may be a correction for a premature increase in confidence. Consumers’ concerns were fed by increased pessimism about job security. This month, more than two in three Americans (67%) say they are less confident about their personal job security now than they were six months ago, compared with 61% in May.
- The RBC Expectations Index rebounded this month, increasing 6.9 points to 40.9, compared with 34.0 in May. This is the first time consumer expectations have shown improvement over four consecutive months since the launch of the index in 2002, RBC said.
Consumer expectations regarding the health of the local economy improved slightly in June as 37% say they believe their local economy will be stronger six months from now, compared with 36% last month. In addition, the proportion of consumers who expect their local economy to be weaker in six months dropped to 18% this month from 20% in May.
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 US adults polled from June 4-8, 2009, by survey-based research company Ipsos Public Affairs.