The Deloitte Research Leading Index of Consumer Spending got a boost this month from falling jobless claims and rising real wages. However, the weak spending outlook continues, primarily due to falling home prices.

"While the index rose this month, the outlook is not completely positive," says Carl Steidtmann, chief economist with Deloitte Services LP's Deloitte Research and author of the monthly index. "The index is based on data from before the recent credit market turmoil, and now we are seeing signs of a more serious credit crunch, with mortgage and refinancing dollars - which fuel the housing market and provide consumers with discretionary cash - becoming even scarcer. Going forward, the housing market and unemployment claims will be central to the index and to consumer spending. "

The index, comprising four components - tax burden, initial unemployment claims, real wages and real home prices - increased to 3.16 percent, from an upwardly revised gain of 2.81 percent a month ago. "Despite mixed economic indicators, the back-to-school selling season was quite strong, and spending in August was better than expected," says Stacy Janiak, Deloitte's U.S. Retail Leader. "With the holiday season fast approaching, retailers should continue to take a cautious approach to inventories and staffing. In addition, pricing and promotion strategies will be critical, and finding ways to drive traffic, deliver superb customer service, and convert shoppers into buyers will be integral to success."

Highlights of the index, which tracks consumer cash flow as an indicator of future consumer spending, include:

- Tax Burden: Revisions in the personal income data show that income growth is up a solid 6.6 percent from a year ago, resulting in an even larger 11 percent gain in taxes paid. The increase in tax burden is a drag on the index.

- Initial Unemployment Claims: The labor market showed continued signs of improvement in the most recent month as claims fell from a year ago, to their lowest level since early 2006. The pick up in claims in recent weeks will have a negative effect on the index in future months.

- Real Wages: Gas prices fell in the most recent month, pushing up real wages. Real wages have now posted positive gains for a full year, their best showing in nearly four years.

- Real Home Prices: New home prices continue to fall. The recent mortgage credit problems will add to the downward pressure on home prices. With the inventory of new and existing homes near record levels, housing prices will continue to exhibit weakness.