Report: July consumer spending index shows uptick

New York City Sending some good news throughout the industry, the Deloitte Consumer Spending Index showed a rise in July, according to a report released Tuesday.

Boosted by falling unemployment claims and tax burdens, along with a rise in real wages, the Index rose to 2.15%, from an upwardly revised gain of 1.85% a month ago.

“The uptick in the Index may give retailers and their suppliers a reason for cautious optimism going forward,” said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index.

“In previous months, home prices were a significant drag on the Index, but the decline is lessening as the housing market is beginning to show signs of stabilizing.”

Steidtmann also pointed out that initial unemployment claims have fallen sharply from their spring peaks and real earnings are up 4.5% from a year ago on falling prices, giving a boost to purchasing power.

“On top of this, tax rebates from the stimulus bill have brought the tax burden on consumers down to record lows,” Steidtmann added. “However, recovery is being delayed by a sharp increase in consumer savings.”

The Index is comprised of four components -- tax burden, initial unemployment claims, real wages and real home prices.

“The factors contributing to the recent increases in the Index suggest that consumers have the means to spend, which, when coupled with an expected improvement in confidence, could release some pent-up demand in the months to come,” said Stacy Janiak, vice chairman and U.S. Retail leader, Deloitte LLP.

Janiak advised retailers to start plotting strategies to speed adaptation to changes in consumer buying patterns, particularly with regard to inventory management and pricing and promotions tactics, which “could be an important catalyst in capturing greater market share and improving profitability this holiday season,” she said.