Consumer spending growth is slowing, with the impact of rising employment tempered by weakened real wages, diminishing tax cut benefits, and slower growth in home prices, according to Deloitte Research’s Leading Index of Consumer Spending.
The index, which considers four factors – tax burden, initial unemployment claims, real wages and real home prices – is used by retailers to gauge the consumer spending outlook for the months ahead. It was rising earlier this year, but has dropped for two months in a row now. It was 5.38 percent in May, and 5.01 percent in June. The last consecutive two-month decline was in early 2003, when amid concern about the war in Iraq.
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Nevertheless, Carl Steidtmann, chief economist for Deloitte Research, said the “uninterrupted decline in unemployment claims and measured rise in job creation” would support “slow and steady growth in consumer spending.”
The amount of money in consumers’ pockets varies sharply, however.
“Consumers are particularly price sensitive at present, leading to a polarization in the retail business,” Steidtmann said. “Price aggressive and luxury retailers are thriving, but mid-market retailers can expect more difficult times ahead.”
Highlights of the new Deloitte report include:
Deloitte, a major professional services firm, provides audit, tax, financial advisory services and consulting through nearly 30,000 people in more than 80 U.S. cities. Deloitte is the U.S. member firm of Deloitte Touche Tohmatsu.
