Housing prices have been a major driver in accelerated consumer spending over the past year, according to an index of consumer spending calculated by Deloitte Research. The pace of consumer spending has more than doubled in the past year, rising from 2 percent to over 4 percent, according to Deloitte Research’s Leading Index of Consumer Spending. Deloitte is a professional services firm that offers audit, tax, financial advisory and consulting services.
The index, a measure of tax burden, initial unemployment claims, real wages and real home prices, rose to an all-time high of 5.72 percent in April, up from an upwardly revised gain of 5.56 percent in March and an upwardly revised gain of 5.11 percent in February.
“While surging home values will fuel consumer spending for the next several months, including purchases of home-related items like furniture, consumer electronics and home improvements, rising gas prices may take the purchasing power of consumers away from retailers,” said Carl Steidtmann, chief economist at Deloitte Research. “While consumers continue to spend, their pool of cash may decrease due to rising gas prices.”
Steidtmann added, “If spending exceeds cash flow, as is the usual case, then we should continue to see an acceleration of consumer spending into the early fall months of 2004.”
The index, which tracks consumer cash flow as an indicator of future consumer spending, also found: Unemployment claims continue to decrease, indicating improvement in the job market; personal income has risen twice as fast as spending since April, pointing to higher future spending; increasing interest rates have impacted the automotive market; the impact of tax refunds will begin to wane after an initial boost in the first half of 2004.
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