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Flat! A Look at Consumer Spending

author: brionnamuyco 7:00 am EST August 25, 2013
By USDR The Deloitte Consumer Spending Index (Index) remained flat in July as improvements in real housing prices and labor markets offset weakness in other areas. The Index tracks consumer cash flow as an indicator of future consumer spending[i]. "Real home prices continue to move higher from a year ago, while initial unemployment claims continue to trend downward," said Daniel Bachman, Deloitte's senior U.S. economist.  "Real wages are still improving, albeit at a slower pace.  While the Index has remained at the same level in the past three months, continued gains in housing and unemployment may help lift consumer confidence and spur future spending." The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — remained at 4.4 this month. "Our recent back-to-school shopping survey showed that consumers are more positive about the U.S. economy than in past years," said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader.  "However, nearly 60 percent of shoppers said they would buy only what the family needs.  About one-third said they would spend more, but mainly due to the perception of higher prices and children needing more expensive items for school.  Despite their improved optimism, consumers may be holding out for more proof that economic stability is lasting before any splurging, meaning retailers have to make their merchandise and offers extremely attractive to finish the back-to-school shopping season strong." Highlights of the Index include: Tax Burden: The tax rate is up 5.8 percent from last year, and is now at 11.9 percent. Initial Unemployment Claims: Claims moved down 5.8 percent from June 2012 to nearly 346,000 in June this year. Real Wages: Hourly real wages ticked up 0.6 percent in a year to $8.78. Real New Home Prices: Real new home prices climbed 10.6 percent from this time last year to reach approximately $107,000.

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