Economic News/Trends and Analysis — February 4, 2010

U.S. Consumer Confidence Tumbles Following January Rally, According to RBC Index

NEW YORK, Feb. 4 /CNW/ - U.S. consumer confidence cooled this month as worries over every facet of their financial situation mounted, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. Economic attitudes soured across the board, with consumers viewing the current economy negatively and displaying increased pessimism about the future. As a result, the RBC Index for February 2010 stands at 39.4, down 18.9 points from January's 58.3 reading.

"Although numerous economic indicators are trending in a favorable direction, it's evident that 'less-bad' is just not good enough for U.S. consumers," said RBC Capital Markets U.S. economist Tom Porcelli. "This month's reading suggests that consumers continue to feel financial pressure from recent volatility in stocks and a soft job market."

The RBC 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 28 - February 1, 2010, by survey-based research company Ipsos Public Affairs. The margin of error was +/-3.1 per cent.

    Highlights of the survey results include:

    -   Confidence in current conditions deteriorated sharply during the past
        month, as seen in the RBC Current Conditions Index, which stands at
        30.5, a dramatic decline from January's 51.6 level. The drop in the
        index is due to a significant weakening in consumers' evaluations of
        the state of their local economies as well as their pocketbooks.
        Currently, almost half of all Americans (46 per cent) rate their
        local economy as weak, up from 40 per cent in January. Consumers'
        unease with personal finances is reflected in lower confidence in
        making major purchases such as a house or car: two-thirds of
        Americans (65 per cent) report they are less comfortable than they
        were six months ago, compared to 62 per cent who were less
        comfortable in January.

    -   Americans' confidence in the future waned considerably as the RBC
        Expectations Index dropped nearly 20 points this month to 48.0, down
        from 67.6 in January. Consumers' near-term concerns about their local
        economies and personal finances are driving the downturn in the
        index. Currently, only one-third of Americans (34 per cent) expect
        their local economy to be stronger six months from now, down from
        38 per cent last month. This month also found that 13 per cent of
        Americans expect their personal finances to be weaker six months from
        now, compared to 11 per cent in January.

    -   Although it fell less than the other sub-indices, the RBC Jobs Index
        saw a drop of 13 points in February to 54.9, compared to 67.9 last
        month. Two-thirds of Americans (67 per cent) say they or someone in
        their close circle have lost their job in the past six months, up
        from 62 per cent in January. In addition, fewer than one-third of
        consumers (29 per cent) are confident they or someone in their circle
        will not lose their job in the next six months, down from 37 per cent
        in January.

    -   Consumers' confidence in the investment climate also soured
        considerably this month, resulting in a 17.3 point drop in the RBC
        Investment Index to 40.8, compared to 58.1 in January. The slide
        stems primarily from decreased confidence in the ability to invest in
        the future. The number of consumers who say they are less confident
        investing for the future has risen to 57 per cent, up from 54 per
        cent last month.

The RBC Index report can be viewed at: www.rbc.com/newsroom/rbc-cash-index.html.

For further information: Loretta A. Healy, The Hubbell Group, Inc., (781) 878-8882; Kait Conetta, RBC, (212) 428-6409

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