Deloitte sees improvement in consumer spending profile


Despite the recent turmoil surrounding the national debt debate and instability on Wall Street, the Deloitte Consumer Spending Index for July has shown improvement. Deloitte says that it’s the first positive month-over-month result it’s been able to report since January 2011.

Deloitte’s CSI is based on consumer cash flow as a predictor of future spending, and is comprised of four main elements, including tax burden, initial unemployment claims, real wages, and real home prices. The June reading was 2.49, and it move up to 2.53 in July on the strength of in increase in home prices and stabilization of fuel prices.

“The housing market is showing multiple signs of stabilizing and that is helping to ease a significant drag on consumer spending,” explains Carl Steidtmann, Deloitte’s chief economist and author of the monthly Index. “A decline in energy prices drove an increase in real wages, perhaps giving consumers more money to spend and restoring confidence despite a weak labor market and the recent debt ceiling debate.”

Deloitte’s Alison Paul added, “A dip in energy prices and warmer temperatures across most of the country is offering consumers reason to take advantage of back-to-school shopping promotions. Deloitte’s back-to-school survey indicates most consumers plan to spend more or the same on back-to-school shopping; more than 60 percent say the most important factor driving buying will be price. Many consumers are using their smart phones to research prices, and store and discount locations — the implication being that retailers will need to be sharp on prices, promotions and assortment this year.”

Deloitte actually sees a rising tax burden as a positive indicator – it’s a sign that economic conditions are improving. Although the current 10.7% of personal income reading is unchanged from June, it represents a 1.1% increase year-over-year.

Real wages are up a tiny smidgeon over June – 0.2%, thanks to energy prices, but are down 2% compared to a year ago. Deloitte also believes that despite its claim of improvement in overall consumer spending capacity, initial unemployment claims are still far higher than is desirable, even with some improvement of late.

RBR-TVBR observation: All we can say is that it’s amazing that a reputable economic watchdog is able to find a rainbow, no matter how bleached out its colors might be, arching above the cesspool of economic news we’ve been reading of late. Ya gotta love it. And if you’re dealing with skittish advertising clients worried about tight-fisted consumers, you can tell them “but Deloitte says…”