But spill and other crises raise fears about U.S. economic recovery
NEW YORK, June 10 /PRNewswire-FirstCall/ - Despite being bombarded daily by news about European sovereign debt issues, the oil leak in the Gulf of Mexico and the U.S. federal deficit, the vast majority of consumers say these and other crises have had little impact on their current spending habits, according to the monthly RBC Consumer Outlook. More than three-in-four Americans (80 percent) say that the European debt crisis has had no effect on their spending habits, and 72 percent say that the Gulf oil spill will result in no change. Other concerns, such as the federal budget deficit, stock market volatility and continued high unemployment, also have had little impact.
Although Americans are not changing their personal spending habits as a result of these crises, the RBC Consumer Outlook Index finds deep concern about their impact on the economy. Large numbers say the Gulf oil spill (68 percent) or the federal budget deficit (60 percent) could slow recovery. However, less than half of consumers (45 percent) said that European debt problems will harm U.S. economic recovery, although a significant share (24 percent) say they do not know enough to offer an opinion.
"We are seeing significant confusion and uncertainty among consumers, who have been battered by bad news over the past month but are unsure about how, or whether, these developments will affect them personally," said Marc Harris, co-head of Global Research at RBC Capital Markets. "While Americans are increasingly apprehensive about the strength and durability of the recovery, they are not yet worried enough to make substantial changes in their own spending habits."
Consumer confidence as measured by the RBC Consumer Outlook Index is down nearly 15 points over the past month, to 58.4 in June from 72.7 in May, erasing all of the gains from earlier this spring. The decline is mostly due to wavering confidence in the economic future, with fewer consumers expecting the economy to improve in the near future.
The decline in the RBC Consumer Outlook Index is driven primarily by shaken confidence in the economic near future, as just 28 percent of consumers believe the U.S. economy will improve in the next year, down from 31 percent in May. Only 15 percent think the national economy will improve in the next three months, down from 20 percent in May. Similarly, Americans' confidence in their local economies has declined, with just 19 percent believing their local economy will get stronger in the next six months and 24 percent believing it will weaken.
Consumers also are increasingly concerned about the current investment climate, particularly the stock market. Four-in-ten consumers (43 percent) think it is a bad time to invest in the stock market, up significantly from 33 percent last month. Fewer are comfortable with the value of their investments, with only 15 percent thinking their investments will improve in value over the next three months. Doubts are also returning about real estate, with 41 percent saying this is not a good time to invest in property, compared to 38 percent in May.
Feeding worries about expectations, consumers report that their current financial situation is not as robust as a month ago. More consumers evaluate their current financial situation as weak (47 percent) this month than last (44 percent). However, comfort making household purchases is essentially unchanged, indicating most households think that their finances are stable, if poor.
In spite of a return to consumer pessimism, all is not bleak. The employment picture continues to improve, with only 45 percent saying they or someone in their circle has experienced job loss recently, down from 55 percent in February. Similarly, fewer Americans are currently worried that they or someone in their household is likely to lose their job in the near future, with just 28 percent expressing such fears, down from 32 percent in May.
"Given the negative news cycle in recent months, it is no surprise that the June RBC Consumer Outlook Index shows a sharp drop in consumer confidence this month," said Harris. "On the positive side, Americans are feeling a little more secure about their jobs, one of the most important foundations of confidence, so we may see a rebound in consumer sentiment once these crises move off the front pages."
Emphasizing the doubts about where the country is headed, two-thirds of Americans (65 percent) now say that the nation is on the wrong track, compared to just 35 percent who say it is moving in the right direction. In May, 60 percent of Americans felt the nation was on the wrong track.
About The RBC Consumer Outlook Index
The RBC U.S. Consumer Outlook Index provides the most up-to-date and comprehensive outlook of U.S. consumers based on data collected from interviews with a nationally representative sample of 1,004 U.S. adults conducted over a multi-day polling period during the first week of each month by Ipsos, the world's second-largest market and opinion research firm. The results in this news release reflect some of the findings of the Ipsos poll conducted June 4-7, 2010. The RBC Consumer Outlook Index is released within 36 hours after the U.S. online panel members are interviewed. Weighting is employed to balance demographics and ensure that the survey sample's composition reflects that of the U.S. adult population according to Census data and to provide results intended to approximate the sample universe.