Consumer Confidence
Increases
Consumer confidence soared in January, reflecting the strongest
level of optimism about future conditions in more than two years,
according to the RBC Consumer Attitudes and Spending by Household
Index.
Produced by RBC Financial Group (New York), the index for
January stood at 95.3, compared with 86.9 in December and
78.2 in January 2006. Overall, consumer sentiment increased
more than eight points, driven by a 29 point jump in assessments
of future conditions.
The primary factor driving consumers’ renewed optimism
was the perception that the economy as a whole would be stronger
in six months. One-third (31 percent) of Americans believed
their local economy would be stronger in six months, versus
24 percent in December.
“The significant increase in the expectations subcomponent
of the CASH Index, which reached 83.8, the highest since October
2004, drove the rise in the overall index,” said T.J.
Marta, economic and fixed income strategist for RBC Capital
Markets. “This increase is likely derived in substantial
part from the takeover of the new Congress. However, the rise
in the CASH Index also likely stems from the continued tight
labor conditions, evidenced by the current low unemployment
rate of 4.5 percent, and the fact that the jobs subcomponent
remains near its high since the index began in 2002.”
While expectations for the economy as a whole improved, expectations
for personal finances remained unchanged from December. Four
in 10 (40 percent) Americans believed their personal finances
will be stronger in six months.
One in five Americans (21 percent) rated their local economy
as strong, versus 26 percent in December. While fewer people
rated their local economy as strong, the January results do
not represent an increase in the number of Americans who believe
it is weak. Rather, the index shows that consumers are more
ambivalent, with a majority (55 percent) rating their local
economy as a four or five on a scale of seven.
Confidence in job security remained stable in January, standing
at 126.3 compared with 126.5 in December. Four in 10 consumers
(43 percent) were more confident about current job security
than they were six months ago.
Personal job loss experience remained unchanged, with one-third
(32 percent) of consumers reporting that they or someone they
know lost their job as the result of economic conditions.
Expectations regarding future job loss remained low, with
fewer than one in five consumers (16 percent) reporting that
future job loss is likely—unchanged from December.
The entire RBC CASH Index report can be viewed at www.rbc.com/newsroom/rbc-cash-index.html.
[March 2007 PET AGE]
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