June 20, 2012 1:50 am
"The Index's increase is due to an ongoing slowdown in declining new home prices, plus a small uptick in real wages as falling energy prices give consumers some relief," explains Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "If these two components continue in this direction, consumer spending and sentiment may gain ground. However, the outcome of the stalling job market and economic crises overseas will determine whether it can be sustained."
Deloitte's analysis of factors influencing consumer spending indicate:
- Housing prices are currently stable and in many markets are turning up. Should prices remain steady, demand may return. Pending sales of existing homes were down 5.1 percent in April from March, possibly because the unseasonably warm winter improved sales.
- In recent weeks, oil prices fell more than $20 a barrel and gasoline prices will follow, giving consumers more purchasing power.
- Three consecutive monthly employment reports were disappointing. Jobless claims are trending up and layoff announcements are up sharply as well. If the labor market continues to deteriorate, the recent improvement in the Index will quickly reverse.
- After posting significant gains early in the year, auto sales have weakened — even in comparison to a period when sales depressed by lack of supply from Japan. Sales in May fell sharply from April. At 13.78 million units on an annualized basis, sales in May were well below the peak sales rate of 15 million units achieved in February, and it is likely that the May numbers — due out in mid-June — will also be weak.
"Though confidence is still fragile, the consumer's mood may improve as they begin to see their housing concerns recede and gas prices fall," says Alison Paul, vice chairman, Deloitte LLP and Retail & Distribution sector leader.
Published with permission from RISMedia.