Deloitte index rises on improved housing, but job market still sluggish
NEW YORK — The Deloitte Consumer Spending Index to 3.53 in September from a reading of 3.27 the previous month, primarily due to a nearly 11% increase in home prices, which offset weakness in other areas of the index.
"The sizable increase in home prices may overstate the strength of the real estate market, though on a positive note, the declines may be over and the market stabilizing," said Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "The increase may also provide a much-needed boost to consumer confidence as other hurdles lie ahead. Consumer spending growth has slowed, and the primary reason that it is flat but not declining is that households are putting less into their savings. Energy prices remain a drag on household incomes and rising prices account for the largest month-to-month drop in real wages since September 2005."
Despite the boost in housing, other areas of the index were disappointing. Real income dropped 0.3% while spending was up just 0.1% from the previous month. While overall spending is up 2% from a year ago, growth in the past three months has been tepid, falling 0.1% in June, rising 0.37% in July and increasing just .08% in August. The savings rate also fell from 4.1% to 3.7% in the most recent month.
Energy prices remain an important factor. Gas prices usually decline in autumn as the summer driving season ends, but in a highly unusual turn, they have continued upward this fall.
The labor market remains a drag on the Index and the broader economy. Claims have moved up and down and hiring seems limited. Job gains over the summer were very weak.
"The ups and downs in housing, employment and energy costs may have given consumers pause this past month," said Alison Paul, vice chairman, Deloitte LLP and retail and distribution sector leader. "As the holidays get into full swing, however, we anticipate shopper enthusiasm will be renewed. Turning their attention away from politics after the election, consumers can get back to the business of shopping. Retailers should benefit from a predicted 3.5% to 4% increase in November through January holiday sales over last year, and non-store channels such as online, catalogs and interactive TV, are expected to increase 15% to 17%. In addition to generating non-store sales, retailers can lift brick-and-mortar performance by using digital channels' influence to drive in-store traffic and conversion."