Consumer confidence: Indices point several ways
Some signs positive, but more reluctant to make big purchases
By Kay Anderson -- Furniture Today, October 20, 2006
New York — Lower gas prices, low unemployment and a calmer-than-expected hurricane season apparently boosted consumer confidence in September. The Conference Board's Consumer Confidence Index, which decreased sharply in August, posted a gain in September to move to 104.5, up from 100.2 in August.
"A more favorable assessment of current conditions coupled with a less pessimistic short-term outlook boosted consumer confidence," said Lynn Franco, director of the Conference Board's Consumer Research Center. "However, even though consumers' concerns have eased, there is little to suggest a significant change in economic activity as we enter the final quarter of 2006."
Franco's assessment was borne out when the lesser-known RBC Cash (Consumer Attitudes and Spending by Household) Index dropped nearly 11 points in October. That index declined to 83.1 this month 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 sharp drop in gas prices in September created a surge in consumer estimations of current personal finances and evaluations of the local economy. 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," added Marta.
A sour note for the home furnishings industry comes from the RBC Investment Index component of the Cash Index.
More consumers are reluctant to make a major purchase than in September, according to this survey. Thirty-two percent of Americans report they are more comfortable making a major purchase like a car or home in October, compared with 36% last month. Comfort in making other household purchases also declined slightly this month, as 38% of consumers say they are more comfortable making other household purchases compared with 42% in September.
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 is composed of four sub-indices, on Current Conditions, Expectations, Investment Index and Jobs. It's based on a representative nationwide sample of 1,001 U.S. adults, polled from Oct. 2 to Oct. 4 by research company Ipsos Public Affairs.
The Conference Board's Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households, done by research company TNS.
The cutoff date for the latest survey was Sept. 19.
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