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Deloitte Consumer Spending Index Reverses Course

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Deloitte Consumer Spending Index Reverses Course

Increase in spending Index in June; home prices and reduced unemployment claims cited.

A consumer spending sentiment indicator monitored by professional services firm Deloitte indicates that consumer sentiment is again on the rise after falling in May.

The Deloitte Consumer Spending Index reversed course in June, showing an increase from 3.67 in May to 3.78 this month. The Index, which comprises four components – tax burden, initial unemployment claims, real wages and real home prices - tracks consumer cash flow as an indicator of future consumer spending.

"Consumer sentiment is on the rise due to positive unemployment numbers and the so called 'wealth effect' of the stock market."

"Strengthening home prices in May and a drop in unemployment claims put the Index in positive territory, showing a consumer's ability and willingness to spend," said Daniel Bachman, Deloitte's senior U.S. economist.  "Although wages are down slightly, there are enough indicators showing the labor market is back, which should offset the wage component's impact on household spending."

"Consumer sentiment is on the rise due to positive unemployment numbers and the so called 'wealth effect' of the stock market, and retailers should look to capitalize," said Alison Paul, vice chairman, Deloitte LLP and retail and distribution sector leader. "As retailers' marketing campaigns go into high gear during the back-to-school season, they will use attractive offers, distinctive events, and promotions to drive traffic.  They should similarly ramp up their analytics capabilities to keep track of where families are shopping and the hot items they buy.  As expected, consumers will use their electronic devices as personal buying assistants, so retailers should also link their marketing messages across mobile and social channels to increase foot traffic and keep that momentum going through the summer."

Highlights of the Index include:

Tax Burden: The tax rate is holding steady for the seventh straight month with a marginal decrease to 11.7%. 

Initial Unemployment Claims: Claims – at 313,000 – declined 8.5% from the same period last year, and 2.4 % from the prior month's rate of 320,000.

Real Wages: Real hourly wages were up 0.5% from this time last year to $8.81, but slightly down by 0.2% from the prior month's reading of $8.82.

Real Median New Home Price: New home prices rose 4.2% from the prior month to $119,000.  Over the past 12 months they have risen 2.6%.

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