US consumer spending strongest for three years

WM Circle Logo

By: Wise Marketer Staff |

Posted on August 20, 2003

US consumer spending strongest for three years

The apparel and general merchandise sectors may benefit most this autumn from what may be the strongest consumer spending period in the US for three years, according to an independent study by Deloitte Research.

According to Deloitte Research's chief economist, Dr Carl Steidtmann, the 2003 'back to school' period's consumer spending appears to still be following the upward trend observed in recent months. The Deloitte Research Leading Index of Consumer Spending, which tracks cash flow as an indicator of future spending, showed a 4.1% gain in July 2003, continuing an upward trend that began in May 2003.

"The index hit a low point in April but now the outlook for consumer cash spending is the best yet this decade," explained Steidtmann. "Improved home prices, a steady job market, a modest wage gain, and increased tax relief are key drivers of the index rise, which suggests a greater consumer willingness to spend in the second half of the year."

Back to school bonus Dr Steidtmann, who points out that his proprietary index is interpretive rather than predictive, says that growth in the index over the past year has outpaced growth in spending due to pent-up demand in the business recovery, and the sobering impact of the war with Iraq.

"Consumers have been in a position to spend for months and, with additional tax reductions in the pipeline, the outlook for consumer cash flow looks highly encouraging for back-to-school retailers," Steidtmann said, suggesting that general merchandise and apparel retailers will be the main beneficiaries of the current increase in spending.

Deloitte Research's index, which is based on 25 years of historical data and seeks to provide an objective monthly outlook for the future direction of consumer spending, examines four components:

  • Tax burden: The biggest positive component of the index continues to be the sharp reduction in consumer tax burden.  
  • Initial unemployment claims: The job market has stabilised over the past month.  
  • Real wages: Low inflation continues to transform small wage gains into modest real gains in wages.  
  • Real home prices: While US house prices slipped in June, they still remain above year-ago levels, giving a slight boost to this month's index.

More Info: