Prices of Houses Reach Highest Level since 2004
NEW YORK -- The Deloitte Consumer Spending Index rose sharply in October, primarily the result of the second consecutive and significant increase in the prices of new houses.
The index, which has four components -- tax burden, initial unemployment claims, real wages and real house prices -- rose sharply to 4.02 from 3.54 the previous month.
The index tracks consumer cash flow as an indicator of future consumer spending.
"The housing market appears to be recovering after bottoming out, while energy prices have begun to recede and lift some of the pressure on wages, boosting confidence and consumers' willingness to spend," said Carl Steidtmann, Deloitte chief economist and author of the monthly index. "This may only be sustainable over the long term if legislative issues are resolved, including the fiscal cliff and debt ceiling, as consumers will start to see their first tax increases at the beginning of the year."
Added Alison Paul, vice chairman of Deloitte LLP and its retail and distribution sector leader. "Rising consumer confidence should give retailers reason to celebrate during the holiday season, but the winds may shift in January, which should encourage retailers to make the most of this good news now."
Highlights of the index:
- The tax burden rose slightly and is at 11.04%. A rising tax burden is a sign of healthy growth in incomes.
- Unemployment claims moved slightly higher to 373,800 from 371,000 in September and up 2% over last year.
- Rising prices for food and energy are keeping downward pressure on wages, which dipped slightly to $8.68.
- House prices continue to rise, reflecting growing consumer confidence. After years of declines, the three-month moving average for real new house prices rose by their largest amount since December 2004, and nearly 8% higher from the same three-month period a year ago.
Published by The Business Journal, Youngstown, Ohio.