Deloitte Consumer Spending Index Moves Up Sharply in October

Nov 19, 2012 No Comments by

NEW YORK, NY Nov. 19, 2012 /PRNewswire/ — The Deloitte Consumer Spending Index (Index) rose sharply in October, primarily due to the second consecutive and significant increase in new home prices. The Index tracks consumer cash flow as an indicator of future consumer spending[i].

“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’s 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.”

The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — rose sharply to 4.02 from a reading of 3.54 the previous month.

“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,” said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader.  “The consumers who appear most optimistic about their holiday spending are those who have been coined ‘omnichannel’ shoppers, or those who use all channels to shop, including mobile phones, online and the store.   These consumers plan to spend 71 percent more on gifts than those who  shop only in stores, according to Deloitte’s annual holiday survey.  We also found that nearly half (45 percent) of consumers plan to shop online.  These spending intentions give retailers reason to interact with consumers across physical and virtual storefronts to augment their messages and sales this holiday season.”

Highlights of the Index include:

Tax Burden: The tax burden rose slightly in the most recent month and is at 11.04 percent. A rising tax burden is a sign of healthy growth in incomes.

Initial Unemployment Claims: Jobless claims moved slightly higher to 373,800 from 371,000 in the previous month and  up 2 percent over last year.

Real Wages: Rising prices for food and energy are keeping downward pressure on wages, which dipped slightly to $8.68.

Real Home Prices:  Home prices continue to move up giving a lift to consumer confidence.  After years of declines, the three month moving average for real new home prices rose by their largest amount since December 2004, and nearly 8 percent higher from the same three-month period a year ago.

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About the author

James Olinger is a native of the San Joaquin Valley. He graduated from West Hills College in Coalinga, California in 2000 with an associate's degree in liberal arts. He joined Business Street in 2004 as a staff writer, and became the associate editor in 2007. He maintains that position today, writing for Business Street Online in a variety of topics.
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