Deloitte Consumer Spending Index Retreats
NEW YORK, Dec. 13, 2012 — After nearly a year of steady gains, the Deloitte Consumer Spending Index (Index) fell in November due to a slowdown in the rise of new home prices and an accelerating decline in real wages. The Index tracks consumer cash flow as an indicator of future consumer spending .
“After a period characterized by improving housing data and waning energy prices this fall, the underlying fundamentals for consumer spending are beginning to deteriorate,” said Carl Steidtmann, Deloitte’s chief economist and author of the monthly Index. “However, the impact may not be felt until the beginning of 2013. While the fiscal cliff debate continues, it is unlikely to significantly weigh down holiday season sales. However, tax increases early in the year are likely to take an immediate toll on consumer spending.”
The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — fell sharply this month to 3.89 from a reading of 4.14 the previous month. The Index reflects data through October but does not yet reflect the complete impact of Hurricane Sandy.
Deloitte’s analysis of factors influencing consumer spending further indicate:
“Retailers are positioned to finish the holiday season on a high note, but the outlook for the New Year puts added pressure on them to outperform ahead of a possible slowdown in January,” said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader. “Their focus should now be on engagement, keeping the customer’s attention and driving repeat trips via online, mobile and store channels. Using analytics capabilities, retailers can stay sharp on promotions and markdowns to move inventory and keep levels low heading into the beginning of the year. That data should also help them determine when to dial-up staffing levels to match traffic peaks and put forward their best service to assist customers and increase holiday sales.”
Tax burden: The tax burden fell slightly in the most recent month to 11.01 percent. A falling tax burden is typically a sign of weaker income growth.
Initial unemployment claims: Jobless claims moved slightly lower this month to 367,250. Going forward, Hurricane Sandy is expected to have a significantly negative impact on the Index as additional jobless claims materialize.
Real wages: Real wages continue to fall and are down to $8.66. A weak labor market coupled with rising prices for food and energy keep downward pressure on wages.
Real home prices: After rising sharply for most of this year, prices for new homes fell slightly this month although they are still up 3.18 percent from a year ago.
Following is a historical analysis of Deloitte’s Consumer Spending Index compared to real consumer spending: click here
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i The Deloitte Consumer Spending Index is a proprietary methodology that analyzes economic factors to gauge consumer cash flow as an indicator of future spending. Deloitte’s analysis includes data from the U.S. Commerce Department, Bureau of Economic Analysis, U.S. Bureau of the Census, U.S. Department of Housing and Urban Development and the U.S. Department of Labor.