Consumers’ short-term euphoria has not translated into long-term optimism: The index dropped nearly 11 points in October. As a result, the index fell to 83.1, compared with 93.7 in September and 74.8 in August.

“Despite moderate declines in the overall index and current conditions sub-index, the figures remain robust,” said T.J. Marta, economic and fixed income strategist for RBC Capital Markets. “Gasoline prices continue to fall, reaching their lowest level since March, and mortgage rates have fallen towards their lowest level since January. Additionally, hourly wages and overall incomes remain strong, and all of this points to a healthy consumer and a soft landing for the U.S. economy.”

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 consists of four sub-indexes—the Current Conditions Index, the Expectations Index, the Investment Index and the Jobs Index.

According to the RBC Current Conditions Index for October, consumer sentiment about the state of the local economy and current personal finances returned to yearly average levels—98.3, down from 118.8 in September.

One out of four American consumers (24 percent) rated their local economy as strong in October, compared with 27 percent in September. A comparable number, 25 percent, rated their current personal finances as strong, compared with 33 percent in September. However, 26 percent rated current finances as weak, compared with 20 percent the prior month. This represents a shift back to 2006 average levels.

One in three Americans (32 percent) reported they were more comfortable making a major purchase like a car or home in October, compared with 36 percent in September. Thirty-eight percent said they were more comfortable making other household purchases, compared with 42 percent in September.

While the overall RBC CASH Index declined in October, consumer confidence was largely a picture of readjustment, rather than increasing pessimism.

“The sharp drop in gas prices in September created a surge in consumer estimations of current personal finances and evaluations of the local economy,” said Marta. “Now that lower gas prices have had time to sink in, the excitement has abated somewhat, and consumer attitudes have returned to average yearly levels.” [December 2006 PET AGE]