After improving in June to its highest level since the beginning of the financial crisis back in 2008, RBC Capital Market’s Consumer Outlook Index took a backwards step in early July, declining by three points to 43.7, from the index’s 46.7 reading in June.
“The overall trend in consumer confidence since it bottomed out early in 2009 has been positive, but the improvements have been erratic,” noted RBC’s chief U.S. economist Tom Porcelli.
“After a solid rally last month, the index for July saw across-the-board declines, with decreases in all of the sub-indices, indicating the continued fragility of the national psyche,” he pointed out. “Americans continue to doubt the overall health of the economy, and we are unlikely to see a sustained, robust rebound in confidence until they have enough positive news to change their minds.”
According to a survey of 1,014 Americans conducted for the RBC Consumer Outlook Index, the watchword among U.S. consumers right now continues to be frugal. Some 42% of those polled said that they spent the same amount in the first half of the year as they did last year while 47% say that they spent less. Looking ahead, 43% plan to keep to the same spending patterns in the second half of 2011 while 50% plan to cut back even more.
RBC’s survey found more than one-in-four Americans (28%) shifted to shopping at lower-priced stores during the recession and are still shopping there, compared to only 8% who shifted to discounters but have since switched back to their usual shopping sites.
Despite the decline in consumer confidence, RBC did note some positive trends in its survey data. For example, actual experience with job losses remains unchanged from June at 38%, a number that remains the best score on this metric observed since 2008.
Although actual job losses remained stable, RBC’s Jobs Sub-Index dipped to 52.8 in July, down 1.9 points from 54.7 in June, and has once again slipped below its historical mean of 53.9.
This month’s drop in the RBC Consumer Outlook Index is driven partly by a weaker Current Conditions Sub-Index, which dipped 3.4 points to 33.4, from 36.8 in June. Nearly half of Americans (48%) say they are less comfortable making a major purchasing decision, such as a home or car, than they were six months ago.
Finally, RBC’s survey indicates U.S. consumers remain uncertain about the state of the U.S. economy overall. Roughly as many believe that the economy will improve in the next year (25%) as think it will get worse (28%). In addition, 63% of Americans say the country is on the wrong track, compared to 62% last month, while 37% say it is headed in the right direction.