Deloitte: Spending up after several months of decline

New York -- A report released Thursday by Deloitte found that consumer spending posted an increase in March, reversing a trend of declines.



The Deloitte Consumer Spending Index climbed higher in March, marking only the third monthly increase over the past 12 months. The Index tracks consumer cash flow as an indicator of future consumer spending.



“The Index turned upward as the pace of declining new home prices slowed,” said Carl Steidtmann, Deloitte’s chief economist and author of the monthly Index. “Despite this improved performance, there is little evidence the housing market is picking up. On the positive side, initial unemployment claims continue to move lower from a year ago.”



According to Deloitte’s analysis, recent developments that indicate consumer cash flow may be strained despite the recent steady increase in real consumer spending include:



Real incomes fell 0.1% in February even as consumer spending rose, and are up just 0.3% from a year ago. The savings rate has fallen from 4.7% to 3.7% over the past two months, adding roughly $110 billion to consumer spending.



Gasoline prices continue to rise. The average price of gasoline rose 4 cents last week to $3.97 a gallon up $0.68 since mid-December.



The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — rose to 1.80 from an upwardly revised reading of 1.52 the previous month.



“The warmer weather is helping consumers shake off the winter doldrums, but they remain vigilant about their pocketbooks, particularly in the face of rising gas prices this spring,” said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader. “In our third annual spring survey of U.S. households, consumers told us they are feeling slightly better about the economy and their finances compared to a year ago. While 67% indicate they plan to spend the same or more this year, nearly 80% say higher prices could cause them to change their spending in the months ahead. We also found that consumers’ use of mobile and online continues to grow across the board. This suggests that digital channels should be one of retailers’ strongest competitive plays to capture the consumer, particularly those shoppers keeping an eye on their household budgets.”