Boomer Gloom Could Dampen Holiday Spending

A national survey of consumer spending habits indicates that a plunge in consumer confidence may mean tough sledding ahead for retail companies in the coming peak holiday spending season.

The sharp drop in consumer sentiment is reflected in a retail and restaurant sector survey released in conjunction with the RBC Capital Markets Annual Consumer Conference this week in Naples, Fla.

The survey findings across four retail sectors — hardlines, softlines, restaurants, and leisure products — correlate with the latest RBC CASH (Consumer Attitudes and Spending by Household) Index, a monthly nationwide sample of 1,000 U.S. households. Consumer confidence declined significantly this month as the CASH Index dropped to 71.1 in September from 89.3 in August, with Baby Boomers the least optimistic group across all four indices — current conditions, expectations, investment, and jobs.

"The RBC CASH Index is an excellent macroeconomic barometer of retail sales and spending trends, and all signs from that and our more micro-oriented retail sector survey point to a slowdown in consumer spending that could affect the coming holiday season," said RBC Capital Markets equity analyst Larry Miller.

Especially for big-ticket items, delay is a common theme for consumers. Nearly 80 per cent of consumers plan to purchase a recreational vehicle in the future, including motor homes, boats, motorcycles and all-terrain vehicles. However, pent-up demand for these big-ticket items is unlikely to be satisfied in the near future, as the majority of consumers say that it will be more than a few years until they make such a purchase.

"After a summer of worrisome economic news, consumers are increasingly concerned about their prospects, and this is affecting their willingness to make major purchases," said Marc Harris, RBC Capital Markets' Director of U.S. Equity Research. "While the signs are pointing negative, there are some bright spots in retailing, and a spate of good news this fall could raise shoppers' spirits in time for the holiday season."

The RBC Capital Markets consumer survey is based on a nationwide sample of 1,001 U.S. adults polled by survey-based research company Ipsos Public Affairs. The margin of error was plus or minus 3.1 percent.