Deloitte says that stabilizing house prices and decreasing fuel costs are sparks that could ignite invigorated consumer spending patterns — but these silver linings are still framing some economic dark clouds.
“The Index’s increase is due to an ongoing slowdown in declining new home prices, plus a small uptick in real wages as falling energy prices give consumers some relief,” said Deloitte economist Carl Steidtmann. “If these two components continue in this direction, consumer spending and sentiment may gain ground. However, the outcome of the stalling job market and economic crises overseas will determine whether it can be sustained.”
Deloitte noted a number of significant factors:
* Stable housing prices – there was an unusual drop in the sale of existing homes from March to April, which may be explained by a better March due to mild weather.
* A $20 per barrel drop in oil pricing, which increases purchasing power (but which also just might be a negative sign – the same thing happened before the Fall 2008 crash).
* Weak employment figures for three months running are an area of concern.
* Automobile sales seem to be stalling.
Deloitte vice chair Alison Paul noted, “Though confidence is still fragile, the consumer’s mood may improve as they begin to see their housing concerns recede and gas prices fall. Retailers need to capitalize on this timing and step up efforts to clear inventory before the back-to-school season starts. Smart retailers are using consumer insights and advanced analytics to sharpen price points and better predict buying behavior. By doing this, retailers are more likely to move over-inventoried goods while holding margins on the items that shoppers want.”