Deloitte Consumer Spending Index Falls Again This Month - SNEWS

Deloitte Consumer Spending Index Falls Again This Month

The Deloitte Research Leading Index of Consumer Spending fell in September, mainly due to continued softness in the housing market and an increase in unemployment claims. The Index attempts to track consumer cash flow as an indicator of future consumer spending.
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NEW YORK, -- The Deloitte Research Leading Index of Consumer Spending fell in September, mainly due to continued softness in the housing market and an increase in unemployment claims. The Index attempts to track consumer cash flow as an indicator of future consumer spending.

"Home prices, which are down 11 percent in real terms from a year ago, are the biggest drag on the Index and on consumer spending," said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index. "The deterioration in the labor market is also a major issue. On the positive side, in recent weeks we've seen a pretty sharp drop in energy prices, which has a very direct impact on consumers' wallets. In addition, the stronger dollar will be a longer-term positive for retailers, as it positively affects cost of goods sold."

The Index, comprising four components -- tax burden, initial unemployment claims, real wages and real home prices -- fell to 0.51 percent, from a revised gain of 0.94 percent a month ago.

"In the current economic environment, consumers are looking for value," said Stacy Janiak, Deloitte's U.S. Retail leader. "Heading into the holiday season, retailers will be well-positioned by emphasizing their unique value propositions, whether that means price, customer service, loyalty programs, or some other metric important to their customer base. In addition, given the current credit situation, retailers should take a close look at their financing options and conduct scenario planning, particularly with respect to liquidity issues."

Highlights of the Index include:
-- Tax Burden: The tax burden continues to fall with the weakening of the
economy.
-- Initial Unemployment Claims: Claims shot up in the most recent month
and are up 35 percent from a year ago.
-- Real Wages: Real wage growth rebounded in the most recent month on
falling energy prices. Real wages are still down 2 percent from a year
ago.
-- Real Home Prices: House prices fell by 11 percent in the most recent
month. Home mortgage refinancing has all but disappeared, reducing
household cash flow. Inventories of unsold homes, while down slightly,
are still too high. A contraction in mortgage credit is limiting home
buying. Until home prices stabilize, housing will remain a major drag
on consumer spending.

For more information about Deloitte's Retail sector, please visit www.deloitte.com/us/retail. For more information about Deloitte's Annual Holiday Survey, including statistics, historical data and useful links, please visit www.deloitte.com/us/2008HolidaySurvey.

About Deloitte
As used in this document, "Deloitte" means Deloitte LLP and Deloitte Services LP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

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