The Deloitte Consumer Spending Index (the Index) dipped in November, primarily due to sustained weakness in the housing market despite incremental gains in other areas. The Index attempts to track consumer cash flow as an indicator of future consumer spending.


"Real consumer spending has accelerated in recent months, and consumers presently retain their spending potential following a period of increased savings, debt reduction and a rise in personal income in the U.S.," said Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "While this momentum may continue, it could peak in the months ahead given the continued drag on the Index from the housing market that is offsetting an uptick in real wages."

The Index, comprising four components - tax burden, initial unemployment claims, real wages and real home prices - fell to 4.29 percent, from an upwardly revised gain of 4.71 percent a month ago.

"Consumers appear to be shaking off their recessionary ways and acting on some pent-up demand this holiday season," said Alison Paul, vice chairman and retail sector leader, Deloitte LLP. "Between retailers' cost and inventory focus over the last couple of years and traffic in the stores and online, many could see a healthy uptick in profitability this year. On the other hand, increased demand may put pressure on inventories and result in empty shelves at the tail end of the season. To avoid disappointed customers and capitalize on sustained demand, retailers should keep a close eye on store level inventories and customer buying patterns – enabling them to quickly adjust mark downs, promotions and assortments."

Highlights of the Index include:

Tax Burden: With the tax benefits of the 2009 stimulus ebbing, the tax burden is pushing slowly higher and is now above levels seen a year ago. If former President George W. Bush's 2001 cuts expire, the tax burden could possibly push higher.

Initial Unemployment Claims: Claims improved slightly in the most recent month and are poised to fall below the narrow range of around 450,000 where they have held for the past year.

Real Wages: Real wage growth continues to make a small contribution to household cash flow due in large part to very weak inflation. For workers who are employed, earnings go a lot farther than they once did.

Real Home Prices: The housing market continues to weigh on the Index and the consumer. Real housing prices are declining once again. With more supply expected to come on the market due to foreclosures, prices will likely remain weak for a while longer.