Deloitte Finds Some Green Shoots in US Consumer Spending
The Deloitte Consumer Spending Index rose in June, after falling four consecutive months. The Index attempts to track consumer cash flow as an indicator of future consumer spending.
“The pace of decline in real consumer spending appears to be abating,” said Ira Kalish, director of global economics and consumer business with Deloitte Research. “High savings rates and unemployment accompanied by a weak housing market have weighed on consumer spending for months, but trends are starting to point in a different direction. For example, the rate of decline in housing prices began to decelerate and, in June, real home prices finally rose from the previous month.”
The Index, comprising four components―tax burden, initial unemployment claims, real wages and real home prices―rose to 1.83 percent, from an upwardly revised gain of 1.4 percent a month ago.
The strength in the number was driven by all of the index components with the exception of real home prices.
Highlights of the Index include:
Tax burden: The tax burden continues to fall with the weakening of the economy and with tax cuts embedded in the stimulus plan taking effect. This is expected to continue to have a positive impact on the index in the months ahead.
Initial unemployment claims: Claims remain at a historically high level. Still, the direction is quite positive and suggests that the job market is bottoming out.
Real wages: Real wages have flattened over the past several months due in large part to weakness in the job market. However, on a year over year basis, real wages are rising at an accelerating rate, in part due to deflation. Declining commodity prices combined with weak overall demand has contributed to the steepest decline in prices in over 50 years.
Real home prices: The decline in real home prices appears to be ending. Lower prices and low interest rates have encouraged a renewal in home buying which, over time, will likely lead to stabilization of prices. However, recent increases in long term rates could have a negative impact on the housing market.
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