Deloitte: Consumer Spending Continues to Grow

As the holiday season hits its stride, consumers are poised to spend, according to Deloitte’s recently released Consumer Spending Index. A 4.63 percent increase in November, after a 4.25-point gain in October, is the highest level the index has reached since 2004.

The index — which tracks consumer cash flow in sectors including tax burden, initial unemployment claims, real wages and real home prices to predict future spending —represents what buying behaviors retailers can expect over the next four to six months.

According to Carl Steidtmann, chief economist with New York-based Deloitte Research, the index has been dramatically increasing in a V-shaped recovery since Jan 1. “What it means is that consumers have the means to spend at a significantly higher level than they are currently spending at … Cash flow, and the factors that affect cash flow, have improved and continue to improve.”

He added: “I think consumers are still quite shell-shocked. There’s also a very high level of uncertainty about a host of different factors, from health care to energy to the stability of the banks, that are all undermining people’s confidence.”

A holiday shopping survey released last week by Discover Card confirms that consumers are reticent about spending. Forty-three percent of consumers plan to spend less this season compared to prior years, the average consumer planning to spend only $723 total on gifts (down from $831 and $896 in 2007 and 2006, respectively). Additionally, 63 percent reported plans to spend within their holiday budget.

Steidtmann said that a flat holiday season had been expected, but that the low spending shouldn’t put a damper on retailers’ outlooks. “I think there’s every reason for retailers to be optimistic. As the economy slowly gains momentum, some of that uncertainty will begin to fade and we’ll begin to see some real job growth, and that’s something that will make the recovery self-reinforcing.”
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