"The housing market is beginning to have a substantial impact on consumer spending," says Carl Steidtmann, chief economist with Deloitte Services LP's Deloitte Research and author of the monthly index. "Large amounts of housing inventory continue to exert downward pressure on home prices, creating a negative 'wealth effect' among consumers.

In addition, with mortgage rates rising and refinancing money drying up, more of consumers' money is going to mortgage payments, with less left over for discretionary spending. Partially countering the housing impact, the growth in the tax burden on households has slowed, the labor market is robust and real wages continue to be strong."

The index, comprising four components - tax burden, initial unemployment claims, real wages and real home prices - fell to 2.67 percent, from an upwardly revised gain of 3.08 percent a month ago. "With back-to-school in full swing and the holiday season just around the corner, retailers need to assess their strategies," says Stacy Janiak, Deloitte's U.S. Retail Leader. "Retailers should take a cautious approach to inventories and staffing, while focusing on excelling at customer service and converting shoppers into buyers."

Highlights of the index, which tracks consumer cash flow as an indicator of future consumer spending, include:
- Tax Burden: After accelerating earlier in the year, the growth in the tax burden on households has slowed. Some of the growth earlier in the year can be attributed to increased IRS efficiency in processing claims. Nonetheless, tax receipts are still up 6.8 percent over the past year.
- Initial Unemployment Claims: While the labor market remains on solid footing, initial unemployment claims did tick up in the most recent month. The rise in claims added to the downward pressure on the index.
- Real Wages: Rising gas prices took a holiday in the most recent month, allowing real wages to rise. After several years of decline, real wages are now adding to the index and offsetting some of the weakness in the other components. Higher gas prices in recent weeks are likely to undermine the index in the future.
- Real Home Prices: New home prices continue to fall and are the major source of weakness for the index. Real home prices are down 5 percent from a year ago, a decline not seen since 1991.