Deloitte Consumer Spending Index up for fourth consecutive month

New York City The Deloitte Consumer Spending Index rose again in September, hitting its highest level in two years. The Index attempts to track consumer cash flow as an indicator of future consumer spending.

"The fundamentals of consumer spending continue to improve, giving households increased purchasing power," said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index. "The housing market is beginning to show signs of stabilizing while initial unemployment claims have fallen significantly. Household net worth is rising and real wages are climbing at their fastest pace in 40 years. Signs of recovery got a boost from the cash for clunkers program in August, plus a gain in real spending has materialized across the board in recent months.”

The Index, comprising four components -- tax burden, initial unemployment claims, real wages and real home prices -- rose to 3.44%, from an upwardly revised gain of 3.08% a month ago.

The index found that the tax burden continues to fall with the weakening of the economy. The tax burden is at a level only seen on a few occasions over the past 50 years during brief periods following tax rebates. Continued decline is expected.

Meanwhile, initial unemployment claims have come down sharply over the past three months, which historically has been a reliable signal of economic recovery, the report said. Claims are down more than 100,000 from their recession peak.

Real wage growth continues to post solid gains due in large part to falling prices, the report said. Real wages are up 4.8% from a year ago as falling prices have given a big boost to consumer purchasing power.

The pace of decline in home prices has slowed significantly on a year-over-year basis. Continued efforts to forestall foreclosures coupled with a tax credit for first-time home buyers have brought some stability to the housing market.