NEW YORK, Aug. 15, 2012 /PRNewswire/ --The Deloitte Consumer Spending Index (Index) decreased slightly in July marking the first decline since February 2012. The Index tracks consumer cash flow as an indicator of future consumer spending.
"The Index slipped primarily due to a drop in real new home prices and a slight rise in jobless claims that offset improvements in real wages," said Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "Consumers enjoyed lower energy costs during the first half of the summer, but a rapidly increasing savings rate suggests they have put some recouped funds away for a rainy day rather than spending it. However, gas prices have started to tick back up. If confidence remains under pressure due to stagnant job growth, a stumbling housing market and Europe's financial crisis, consumer spending may begin to contract heading into autumn."
Deloitte's analysis of factors influencing consumer spending further indicate:
The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — fell to 3.25 from an upwardly revised reading of 3.27 the previous month.
"Consumers responded favorably to markdowns and promotions in July, and we anticipate retailers will finish the summer strong as families restock before sending their children off to school," said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader.
"However, that momentum may be seasonal and temporary if the Index's decline is more than a blip on the radar. If concerned consumers decide to tighten their purse strings, retailers may not feel the impact until the beginning of the holiday season. Since retailers placed their holiday orders early in the year, they should map out scenarios that will help them navigate shifts up or down in consumer demand, and quickly adjust pricing, inventory and promotional strategies accordingly this fall."
Highlights of the Index include:
Tax Burden: Income tax averaged 11.06 percent. The tax burden's rate of increase slowed slightly last month, giving a small boost to the Index.
Initial Unemployment Claims: Jobless claims increased slightly in the most recent month to 385,000.
Real Wages: Declining energy prices continued to lift real wages slightly, putting average hourly earnings at $8.77.
Real Home Prices: The big change this month was a reversal in the improvement in new home prices, which are down 4.77 percent from a year ago.
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