Deloitte Consumer Spending Index Falls Due to House Prices, Labor Market

The Deloitte Research Leading Index of Consumer Spending fell in July, continuing the decline the Index has experienced since October 2007. The Index attempts to track consumer cash flow as an indicator of future consumer spending.
Author:
Updated:
Original:

NEW YORK -- The Deloitte Research Leading Index of Consumer Spending fell in July, continuing the decline the Index has experienced since October 2007. The Index attempts to track consumer cash flow as an indicator of future consumer spending.

"House prices, which are down 10 percent in real terms from a year ago, are the biggest drag on the Index," said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index. "In addition, unemployment claims rose and real wages were hit by rising energy and food prices. On the plus side, consumer cash flow got a boost from the first installment in tax rebates."

The Index, comprising four components -- tax burden, initial unemployment claims, real wages and real home prices -- fell to 1.46 percent, from a revised gain of 1.64 percent a month ago.

"It appears that many consumers have chosen not to spend their federal income tax rebate checks, and rather have put the money into savings or used it to pay off debt," said Stacy Janiak, Deloitte's U.S. Retail leader. "As a result, retailers still have an opportunity to encourage consumers to use this increased liquidity in July and August as we head into the back-to-school shopping season. Retailers who have the right merchandise mix and carefully manage price points and promotions may be best positioned to capitalize on this opportunity."

Highlights of the index include:

-- Tax Burden: Despite weak growth, the tax burden fell sharply this month as the U.S. Treasury sent out the first round of rebate checks. The sharp rise in the savings rate to 5 percent shows that the bulk of the rebate money was not spent, but rather was put into savings or used to pay off debt. This may provide consumers with more liquidity in the fall and could stimulate back-to-school spending.

-- Initial Unemployment Claims: Unemployment claims continue to rise and are up more than 20 percent from a year ago. With more layoffs expected, claims could trend higher.

-- Real Wages: Real wage growth is being hit by a weak labor market and sharply higher prices for food and energy. Until energy prices break, real wages are expected to be a drag on future spending.

-- Real Home Prices: House prices fell by 10 percent in May compared with May of last year. Home mortgage refinancing has all but disappeared, reducing household cash flow. Inventories of unsold homes, while down slightly, are still quite high. A contraction in mortgage credit is limiting home buying. Until home prices stabilize, housing will remain a drag on consumer spending.

For more information about Deloitte's Retail sector, please visit www.deloitte.com/us/retail

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.

Related

Deloitte Consumer Spending Index Continues Upward in February

NEW YORK-- The Deloitte Consumer Spending Index rose in February, once again driven by strong growth in real wages and a decline in energy prices. The Index attempts to track consumer cash flow as an indicator of future consumer spending. "Falling oil prices and reduced tax ...read more

Deloitte Consumer Spending Index Points Upward in July

NEW YORK -- The Deloitte Consumer Spending Index rose in July, steered by falling unemployment claims and tax burdens, along with a rise in real wages. The Index attempts to track consumer cash flow as an indicator of future consumer spending. "The uptick in the Index may give ...read more

Deloitte Consumer Spending Index Falls Again This Month

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 ...read more

Deloitte Consumer Spending Index Stabilizes in November

NEW YORK -- The Deloitte Research Leading Index of Consumer Spending stabilized in November, primarily due to the drop in gasoline prices and the resulting rise in real wages. The Index attempts to track consumer cash flow as an indicator of future consumer spending."While home ...read more

Deloitte Consumer Spending Index Up For The Fourth Consecutive Month

NEW YORK -- The Deloitte Consumer Spending Index rose again in September, hitting its highest level in two years. The Index attempts to track consumer cash flow as an indicator of future consumer spending. "The fundamentals of consumer spending continue to improve, giving ...read more

Deloitte Consumer Spending Index Turns Negative for the First Time Since 1980

NEW YORK -- The Deloitte Research Leading Index of Consumer Spending fell into negative territory in October, primarily due to substantial increases in unemployment claims and continued softness in the housing market. The Index attempts to track consumer cash flow as an indicator ...read more

Deloitte Consumer Spending Index Continues Positive Momentum

NEW YORK -- The Deloitte Consumer Spending Index (Index) rose in October for the fifth consecutive month, driven in large part by real wage growth. The Index attempts to track consumer cash flow as an indicator of future consumer spending. "The continued rise in the Index points ...read more

Deloitte Consumer Spending Index Falls to Lowest Level Since 2001, With Home Prices as Single Largest Drag

NEW YORK -- With house prices falling nearly 12 percent in March 2008 and unemployment claims increasing 9.8 percent in the same period, the Deloitte Research Leading Index of Consumer Spending (the "Index") has reached its lowest level since 2001.The Index attempts to track ...read more

Consumer Spending Seen at Important Turning Point as Deloitte Index Shifts From Positive to Negative

NEW YORK -- As economic conditions trend downward, consumer purchasing appears to be at an important turning point, the Deloitte Research Leading Index of Consumer Spending has found. "The Index turned from positive to negative in real growth terms in January, indicating a much ...read more