For the third consecutive month, pressures on consumers are resulting in projections that they will be keeping a tighter grip on their wallets. Although there is light visible at the end of the tunnel, there are current hurdles to overcome.
“The Index is down primarily due to slowing increases of new home prices,” said Patricia Buckley , director, economic policy and analysis and author of the monthly Index.
“Looking ahead, gradual improvements in initial unemployment claims and real wages may help the Index reverse its course. In the near term however, spending may remain constrained as consumers contend with taxes hikes and rising prices at the pump.”
The key number fell from 3.93 in December to 3.87 in January.
“Shoppers are taking their annual post-holiday pause and may slow their spending even more as they adjust to higher payroll taxes,” said Alison Paul , vice chairman, Deloitte LLP and retail & distribution leader. “The hit to consumers’ paychecks is likely to be more pronounced among lower- and middle-income Americans who may put household necessities on hold, not just discretionary items. Retailers should hone in on price sensitivity, basket size, and traffic data using analytics to quickly respond with appropriate pricing, assortment and promotions rather than lose a shopper to a more competitive retailer.”
Despite the rise in social security payroll deductions, Deloitte says overall tax burden fell slightly. Initial unemployment claims were also down – partially an effect of a spike caused by Hurricane Sandy that pushed them higher than would have otherwise been the case in November. Both real wages and home prices are also up.
RBR-TVBR observation: This year-beginning pessimism goes against the tendencies we have noted in the past, and as we noted recently, consumer sentiments often run counter to those of the business management community. Our gut feeling, based on seeing these types of reports from many sources and over a period of time, is that rather than seeing the usual springtime slump in consumer sentiment, we’ll find that things don’t seem quite as bad as perhaps they did as 2012 rolled over into 2013, and sentiment will improve accordingly.