Deloitte Anticipates Healthier Selling Environment For Retailers In Spring 2009

The Deloitte Consumer Spending Index rose in February, once again driven by strong growth in real wages and a decline in energy prices. The Index attempts to track consumer cash flow as an indicator of future consumer spending. The Index,

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The Deloitte Consumer Spending Index rose in February, once again driven by strong growth in real wages and a decline in energy prices. 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 — increased to 1.53%, from an upwardly revised gain of 1.27% a month ago.

“Falling oil prices and reduced tax burdens are giving consumers the wherewithal to spend. What they are lacking is the will to do so,” says Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index.

“At the same time, real inflation adjusted home prices are still down nearly 9% from a year ago and are a drag on the Index. The rebound in the Index coupled with anticipated tax cuts point to a better selling environment for retailers this spring. However, a full recovery in consumer spending will likely have to wait for stabilization of the housing market.”

“Despite increasing purchasing power, consumers are still generally holding back,” says Stacy Janiak, vice chairman and U.S. retail leader, Deloitte LLP. “They do, however, seem to be breaking out of their winter doldrums by cautiously spending on items like spring clothing and certain electronics,”

“Understanding that consumers are spending selectively, retailers should consider sharpening the connections with their customers — not just to drive traffic today but to build deep customer loyalty for the future.”

L.D.

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