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The Deloitte Consumer Spending Index headed south for the second consecutive month in January, mainly because of a slowdown in real wage growth. The index aims to track consumer cash flow as an indicator of future consumer spending.
“After rising through the summer and fall of 2009, real wages are running up against rising energy prices,” noted Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of New York-based Deloitte Services, LP, and author of the monthly index. “The weakness in real wages, however, is being offset by the small but sustained decline in the average tax rate, steady improvement in home prices, and notable improvements in the number of initial unemployment claims.”
The measure, which consists of four components — tax burden, initial unemployment claims, real wages and real home prices — fell to 4.31 percent, from an upwardly revised gain of 4.64 percent in December. That month’s index dipped slightly, primarily due to a decline in real wages, but remained near its highest level since 2004.
“Many retailers have experienced a profound shift in their customer base and are competing on a new playing field where a vigilant consumer has emerged,” added Stacy Janiak, vice chairman and Deloitte’s U.S. Retail leader. “Retailers should stay attuned to customer demands by putting customer analytics at the forefront of their game plan. Retailers that pursue a deeper and more dynamic analysis of customers’ in-store and online interactions may generate actionable insights that better align their pricing, merchandising and marketing strategies with customers’ interests.”
Among the highlights of the index are:
—The tax burden, after stabilizing, is again moving lower. The average tax burden is at its lowest level in over 40 years, because of the effects of the stimulus bill passed in February 2009.
—Initial employment claims have plummeted over the past nine months, which historically has been a reliable sign of economic recovery. Claims are down over 200,000 from their recession peak and are down from a year ago.
—Real wage growth, which had been the biggest contributor to the index, is basically flat with a year ago as energy prices are driving up the price level and hurting the real purchasing power of modest wage growth.
—The pace of decline in home prices continues to slow on a year-over-year basis. Government attempts to forestall foreclosures, paired with the extension and expansion of the tax credit for home buyers, have imparted some stability to home prices. Real home prices are up over 5 percent off their late-summer lows.