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Deloitte: Consumer Spending Index Hits a 51-Month High

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Deloitte: Consumer Spending Index Hits a 51-Month High

Employment, gas prices encouraging consumers.

According to a recent survey from professional services firms Deloitte, consumers are in a spending mood.

The Deloitte Consumer Spending Index increased in January to its highest level since September 2010. The Index tracks consumer cash flow as an indicator of future consumer spending.

"The improving economic picture, a stronger dollar that can positively impact retailers' margins, and accelerating consumer spending should encourage retailers to invest for growth."

"The Deloitte Consumer Spending Index increased in January, hitting a 51-month peak," said Daniel Bachman, Deloitte's senior U.S. economist. "The increase is due to positive contributions from all four components of the Index. The sharp drop in unemployment insurance claims is in line with a steady recovery in the U.S. labor market and augurs well for continued increased consumer spending. Additionally, January gas prices decreased 41 percent from this time last year, to a national average of $2.12 per gallon. That translates into an extra $994 in consumers' pockets annually."

The index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — increased to 4.8 this month from 4.2 last month.  

"The improving economic picture, a stronger dollar that can positively impact retailers' margins, and accelerating consumer spending should encourage retailers to invest for growth," said Alison Paul, vice chairman, Deloitte LLP, and retail and distribution sector leader. "To start, retailers should assess whether their business is evolving with customer expectations. Convenience has made a comeback on the heels of improving household finances, while digital experiences increasingly influence consumers' preferences whether shopping online or in the store. Simply having a presence across each shopping platform is insufficient. There is an opportunity to engage the consumer in a cohesive shopping journey rather than disparate multi-platform visits, extending well beyond promotions to product assortment, pricing, shipping, return options."

Tax Burden: The tax rate was effectively unchanged from the last month, remaining steady at 11.9%. 

Initial Unemployment Claims: Claims decreased to 291,000 from 299,600 last month, and are down 15.6% from the same period last year.

Real Wages: Real hourly wages were up 0.2% from last month and 1.1% from the same period last year, increasing to $8.94 this month.

Real Median New Home Price: New home prices increased 2.6% from the prior month to $126,000. Prices are 7.2% higher than the same period last year.

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