Consumer spending in September dropped off as softness in the housing market and rising unemployment claims continued to drag down the national economy, according to Deloitte Research’s Leading Index of Consumer Spending.
Deloitte’s index dropped to 0.51 percent last month from a revised gain of 0.94 percent a month earlier.
The index tracks consumer cash flow as an indicator of future consumer spending. It comprises tax burden, initial unemployment claims, real wages and real home prices.
“Home prices, which are down 11 percent in real terms from a year ago, are the biggest drag on the index and on consumer spending,” says Carl Steidtmann, chief economist with Deloitte Research and author of the monthly index. “The deterioration in the labor market is also a major issue.”
On the positive side, Steidtmann notes energy prices have dropped in recent weeks, and he says the stronger dollar will be a long-term positive for retailers.
The tax burden is still falling with the weakening of the economy, according to the index. Real-wage growth rebounded on falling energy prices but is still down 2 percent from a year ago. Initial unemployment claims are up 35 percent from a year ago.
“Home mortgage refinancing has all but disappeared, reducing household cash flow,” according to the index. “Inventories of unsold homes, while down slightly, are still too high. A contraction in mortgage credit is limiting home buying. Until home prices stabilize, housing will remain a major drag on consumer spending.”
Deloitte Research conducts research on major issues facing businesses, including strategy, economics, regulation and technology. It is a division of Deloitte Touche Tohmatsu of New York.
