Consumer Index negative for first time since 1980

NEW YORK The Deloitte Research Leading Index of Consumer Spending fell into negative territory in October, primarily due to substantial increases in unemployment claims and continued softness in the housing market. The Index attempts to track consumer cash flow as an indicator of future consumer spending.

The Index, comprising four components -- tax burden, initial unemployment claims, real wages and real home prices -- fell to -0.10%, from a revised gain of 0.54% a month ago.

This is the first time the Index has produced a negative reading since October 1980. In the past three months, the Index has fallen 1.75%, the sharpest deceleration in the Index since October 1990.

"Given the credit crunch and the impact it's having, retailers need a strong focus on cash flow management this holiday season," said Stacy Janiak, vice chairman and U.S. Retail leader of Deloitte LLP. "At the same time, it's important to have a strategy and stick with it. While it's tempting to match or beat competitors' aggressive promotions, that approach can exact a heavy toll on profits. Retailers should be very strategic in making changes to their planned holiday promotions to limit the adverse margin impact as much as possible. Cost containment and labor management should also remain top of mind."