Spending was up in September, according to the latest Deloitte Consumer Spending Index. Deloitte noted that a welcome but perhaps ephemeral increase in housing prices helped mask weakness elsewhere, including the economic drag produced by high energy costs.
Deloitte noted that the gains in housing amounted to an impressive 11% — a number that was perhaps a little too impressive. “The sizable increase in home prices may overstate the strength of the real estate market, though on a positive note, the declines may be over and the market stabilizing,” said Carl Steidtmann , Deloitte’s chief economist and author of the monthly Index. “The increase may also provide a much-needed boost to consumer confidence as other hurdles lie ahead. Consumer spending growth has slowed, and the primary reason that it is flat but not declining is that households are putting less into their savings. Energy prices remain a drag on household incomes and rising prices account for the largest month-to-month drop in real wages since September 2005.”
September featured a drop in real income of 0.3%, a contributor to a tiny 0.1% increase in consumer spending. The total spent is up 2% from the prior year but has been slowing for three months.
The failure of gas prices to drop as usual as fall begins has been one of the factors preventing the expenditure of money on other items. And continuing sluggishness in the jobs market isn’t helping either.
“The ups and downs in housing, employment and energy costs may have given consumers pause this past month,” said Alison Paul , vice chairman, Deloitte LLP and retail & distribution sector leader. “As the holidays get into full swing, however, we anticipate shopper enthusiasm will be renewed. Turning their attention away from politics after the election, consumers can get back to the business of shopping. Retailers should benefit from a predicted 3.5 to 4 percent increase in November through January holiday sales over last year, and non-store channels such as online, catalogs and interactive TV, are expected to increase 15 to 17 percent. In addition to generating non-store sales, retailers can lift brick-and-mortar performance by using digital channels’ influence to drive in-store traffic and conversion.”