Thursday, April 9, 2009

U.S. Consumer Confidence Rebounds in April

For the first time a majority of Americans think real estate is a good investment since the housing bubble became apparent in 2005.

Reversing seven months of crumbling confidence, Americans' economic enthusiasm rallied this month, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index, which posted its first significant improvement since September 2008. Overall consumer confidence advanced 30.1 points, bringing the RBC CASH Index to 38.3 in April, compared to 8.2 in March. Consumer sentiment was bolstered by a 58.3 point increase in Americans' expectations for the future. Americans' attitudes about current conditions and investing also increased in the past month, but they continue to worry about jobs.

Consumer confidence is not my favorite indicator. My guess it is up at this point for two reasons. Strength in the stock market and the end of the Obama Administration fear mongering.

Consumers' overall opinions regarding investing improved significantly this month sending the RBC Investment Index to a reading of 44.8, up 20.2 points from 24.6 in March. The increase in the index is being driven by improving attitudes toward stock and real estate investments. Consumers reporting that the next 30 days will be a bad time to invest in the stock market dropped to 61 per cent, down from 70 per cent last month. More than half of consumers (51 per cent) believe the next month will be a good time to buy real estate, compared to 43 per cent in March.

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: 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.

In April, nearly four-in-ten consumers (39 per cent) believe their community's economy will be stronger in the next month, compared to 30 per cent in March, while only 21 per cent believe it will continue to weaken, compared to 30 per cent last month. In addition, only 13 per cent of Americans expect their personal financial situation to weaken over the next six months, compared to 18 per cent in March.

The RBC Current Conditions Index improved markedly in April to 35.8, compared to 14.8 in March. This is the second consecutive month of gains in the RBC Current Conditions Index and the largest month-to- month increase in current conditions since September 2006. Americans' assessments of their current personal financial situation as weak dropped to 30 per cent this month, compared to 35 per cent in March. In addition, this month only 41 per cent of consumers rate their current local economic conditions as weak, compared to 47 per cent last month.

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