Deloitte Consumer Spending Index Slips Again in January

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Feb 10, 2010, 10:54 ET

NEW YORK, Feb. 10 /PRNewswire/ -- The Deloitte Consumer Spending Index ticked downward for the second month in a row primarily due to a slowdown in real wage growth. The Index attempts to track consumer cash flow as an indicator of future consumer spending.

"After rising through the summer and fall of 2009, real wages are running up against rising energy prices," said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index. "The weakness in real wages, however, is being offset by the small but sustained decline in the average tax rate, steady improvement in home prices, and notable improvements in the number of initial unemployment claims."

The Index, comprising four components -- tax burden, initial unemployment claims, real wages and real home prices -- slipped to 4.31 percent, from an upwardly revised gain of 4.64 percent a month ago.

"Many retailers have experienced a profound shift in their customer base and are competing on a new playing field where a vigilant consumer has emerged," said Stacy Janiak, vice chairman and Deloitte's U.S. Retail leader. "Retailers should stay attuned to customer demands by putting customer analytics at the forefront of their game plan. Retailers that pursue a deeper and more dynamic analysis of customers' in-store and online interactions may generate actionable insights that better align their pricing, merchandising, and marketing strategies with customers' interests."

Highlights of the Index include:

Tax Burden: The tax burden, after stabilizing, is again moving lower. The average tax burden is at its lowest level in more than 40 years due to the effects of the stimulus bill passed in February 2009.

Initial Unemployment Claims: Initial claims have come down sharply over the past nine months which historically has been a reliable signal of economic recovery. Claims are down more than 200,000 from their recession peak and are down from a year ago.

Real Wages: Real wage growth, which had been the biggest contributor to the Index, is nearly flat with a year ago as energy prices are pushing up the price level and hurting the real purchasing power of modest wage growth.

Real Home Prices: The pace of decline in home prices continues to slow on a year-over-year basis. Government efforts to forestall foreclosures coupled with the extension and expansion of the tax credit for home buyers have brought some stability to the home prices. Real home prices are up more than five percent off their late-summer lows.

For more information about Deloitte's retail sector, please visit www.deloitte.com/us/retail.

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SOURCE Deloitte