The Deloitte Consumer Spending Index fell significantly in April, showing the largest single month decline since November 2007. The Index tracks consumer cash flow as an indicator of future consumer spending.
"A sharp deterioration in real wages coupled with a rise in jobless claims weighed heavily on the Index in April," said Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "Growth in consumers' disposable income recently accelerated following a cut in Social Security taxes, giving consumers the means to spend. However, rising food and energy prices have started to undermine consumers' purchasing power, which may continue to lose ground to inflation in the months ahead, particularly if unemployment claims head higher."
The Index, which is comprised of four components — tax burden, initial unemployment claims, real wages, and real home prices — fell to 3.16 percent, from an upwardly revised gain of 3.78 percent a month ago.
"Consumers are spending at a steady pace but they will pull in the reins if inflation and employment jitters set in," said Alison Paul, vice chairman and U.S. retail sector leader, Deloitte LLP. "Retailers pulled many of the levers of cost reduction during the recession, leaving little room to absorb price increases from their suppliers. The emphasis now is on precision retailing, using customer data to accurately read demand and improve inventory management, localized assortment, and pricing strategy."
