Deloitte Consumer Spending Index Plummets
The Deloitte Research index of consumer spending dipped to a new low this month, indicating the possibility of a dramatic drop in consumer spending, the company reported Thursday.
“Every single factor, other than the tax burden, has pulled the index lower this month,” said Carl Steidtmann, Deloitte’s chief economist and author of the monthly index, in a statement. “With GDP growth slowing down considerably in the fourth quarter, the chances of any substantial recovery appear low. Unemployment and energy prices remain the key concerns for consumption in the months ahead.”
Four components – tax burden, initial unemployment claims, real wages and real home prices – comprise the index which fell to 1.78% from last month’s index of 2.55%, according to Deloitte.
The risk of higher unemployment is increasing with a sharp fall in GDP growth in the fourth quarter to 0.6% even though the unemployment rate, which rose only marginally to 5%, would indicate otherwise, the company reported.
Also, inflation increased 0.3% in December with energy prices accounting for about one third of the overall increase in prices, which could be one of the first signs of a softening labor market, according to Deloitte.
Housing prices fell by 9% on a year-on-year basis in December 2007, as compared to December 2006, Deloitte noted. And though there has been a substantial increase in mortgage loan applications this month, with a tight credit market, it is not clear yet if a revival in housing demand is underway, according to Deloitte.
