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Deloitte Consumer Spending Index rises

Consumers more willing to spend as real wages, unemployment claims and housing prices stabilize

By Alex Palmer
September 14, 2009

The Deloitte Consumer Spending Index rose again in August, reaching its highest level since October 2007. The index, which monitors consumer cash flow to help predict future spending, moved up to 2.94 percent for August, up from a revised 2.39 percent gain a month ago.

The index is drawn from four factors--tax burden, initial unemployment claims, real wages and real home prices--many of which are stabilizing, according to the index's author and Deloitte Research's Chief Economist Carl Steidtmann.

"Personal income tax rates are at the lowest levels of the past 50 years and unemployment claims are down from their peak, while home prices are beginning to show signs of stabilizing after plunging for the last three years," said Steidtmann in a statement. "The recent strength in auto and home sales indicates that an uptick in real spending is materializing for a select few sectors."

Home prices continued to fall in August, but at a slower pace thanks to home and auto incentives as well as tax credits that are helping to attract consumers. The fact that monthly unemployment claims dropped below 600,000 in August and real wages were up 5.1 percent compared with a year ago has helped increase consumers' willingness to buy.

This shift in likely consumer spending is being aided by retailers and merchants who are appealing to financially constrained consumers with incentives of their own, said Stacy Janiak, vice chairman and U.S. retail leader for Deloitte LLP, in a statement. "We are seeing various consumer-facing companies including retailers, hotels and eating establishments pick up on this trend. These pricing strategies will likely help win over certain shoppers during the important year-end holidays."

--Nielsen Business Media
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