Deloitte Consumer Spending Index Up in September
NEW YORK -- The Deloitte Consumer Spending Index rose in September, primarily the result of a nearly 11% increase in home prices, which offset weakness in other areas. The index tracks consumer cash flow as an indicator of future consumer spending.
"The sizable increase in home prices may overstate the strength of the real estate market. … The declines may be over and the market stabilizing," said Carl Steidtmann, Deloitte chief economist and author of the monthly index. "The increase may also provide a much-needed boost to consumer confidence as other hurdles lie ahead. Consumer spending growth has slowed, and the primary reason that it is flat but not declining is that households are putting less into their savings. Energy prices remain a drag on household incomes and rising prices account for the largest month-to-month drop in real wages since September 2005."
Deloitte's analysis of factors influencing consumer spending further show:
- Personal income and spending data for August were disappointing. Real incomes dropped 0.3% while spending was up just 0.1% from July. While overall spending is up 2% from a year ago, growth in the past three months has been tepid, falling 0.1% in June, rising 0.37% in July and increasing just .08% in August. The savings rate also fell to 3.7% from 4.1% in the most recent month.
- Energy prices remain an important factor. Gas prices usually decline in autumn as the summer driving season ends, but in a highly unusual turn, they have continued upward this fall.
- The labor market remains a drag in the index and on the broader economy. Claims have moved up and down and hiring seems limited. Job gains over the summer were very weak.
- The index, which comprises four components -- tax burden, initial unemployment claims, real wages and real home prices -- rose to 3.53 from a reading of 3.27 in July.
"The ups and downs in housing, employment and energy costs may have given consumers pause this past month," said Alison Paul, vice chairman, Deloitte LLP and retail and distribution sector leader. "As the holidays get into full swing, however, we anticipate shopper enthusiasm will be renewed. Turning their attention away from politics after the election, consumers can get back to the business of shopping. Retailers should benefit from a predicted 3.5% to 4% increase in November through January holiday sales over last year, and nonstore channels such as online, catalogs and interactive TV, are expected to increase 15% to 17%. In addition to generating nonstore sales, retailers can lift bricks-and-mortar performance by using the influence of digital channels to drive in-store traffic and conversion."
Among the highlights of the index:
- The tax burden rose slightly in August to 11.05%. A rising tax burden is often a sign of healthy income growth.
- Unemployment claims moved higher to 371,000 and were 2% higher than in August 2011.
- Rising energy prices sent real wages tumbling to $8.71 an hour -- the largest month-to-month drop since September 2005.
- In a thin market, housing prices can be volatile as the mix of homes sold becomes more significant. Real home prices soared 10.5% in August, accounting for all of the gain in the Index.
Published by The Business Journal, Youngstown, Ohio.