May 23, 2012 5:46 am
The Deloitte Consumer Spending Index (Index) posted another monthly increase in April as the pace of falling new home prices slowed. The Index tracks consumer cash flow as an indicator of future consumer spending.
"The Index has been undergoing a mix of changes as housing, energy prices and unemployment tip back and forth each month," explains Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "On the positive side, some stability in home prices over the last two months helped the Index move upward. However, with a jobless recovery, falling incomes and rising savings rates, consumer spending growth may turn sluggish."
Deloitte's analysis of additional factors influencing consumer spending indicate:
- Real consumer spending posted a small rebound in the first quarter due to a rise in auto sales driven by a significant reduction in the quality of auto lending.
- A significant decline in driving may be having an impact on retailing. Over the past 12 months through February, miles driven are down 1.1 percent from a year ago. There have only been three periods of declining driving in the past 40 years: 1973 -- 1974; 2008 -- 2009 and now. Higher energy prices are one factor, but increased consumer spending over the Internet and more telecommuting must be playing a role as well.- Despite an improvement in the real price of new homes, it will likely be a long time before prices begin rising. Simultaneously, the steady decline in jobless claims has reversed.
The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — rose to 2.07 from an upwardly revised reading of 1.88 the previous month.
Highlights of the Index include:
Tax Burden: The tax burden fell slightly this month. The significant rise in tax refunds has given a boost to household cash flow and temporarily pulled down the tax rate.
Initial Unemployment Claims: The decline in claims has stabilized and reversed in recent weeks, and initial unemployment claims are up more than 12 percent from a year ago.
Real Wages: With energy prices rising, real wages continue to fall, and are down 0.9 percent from this time last year.
Real Home Prices: Prices fell slightly in the most recent month, and are down 1.45 percent from a year ago. A slowdown in the pace of real home prices is a positive as it becomes less of a drag on the Index.
Published with permission from RISMedia.