Consumer Spending Down in March

Falling home prices and rising unemployment claims continued to put downward pressure on the Deloitte Consumer Spending Index in March. The index, compiled by Deloitte LLP “as an indicator of future consumer spending,” found that rising energy prices countered much of the recent growth in real wages and put many consumers on spending sidelines last month. The drop in consumer spending may indicate hesitance from prospective home buyers to seek purchase money from mortgage originators while home prices continue to fall. “Affordability is at an all-time high in the housing market, but home price deflation gives potential buyers an incentive to wait while also reducing homeowners’ ability to tap home equity through refinancing,” said Carl Steidtmann, chief economist with Deloitte Research. He said he expects the stimulus package and new tax incentives to boost consumer purchasing power, meaning that, “while consumers are still in a holding pattern, the pace of decline in real consumer spending appears to have stabilized.” The monthly index — calculated from tax burden, initial unemployment claims, real wages and real home prices — fell in March from an upwardly revised gain the month before. Deloitte found that the tax burden continued to fall with the weakened economy in March, while rising unemployment claims were up 75% from a year ago. Deloitte also found that real wages were up 4.1% from a year ago, although real wage growth stalled in March as energy prices rose. Real wages were up 9.9% over the last seven months on an annualized basis, “as energy prices have given a big boost to consumer purchasing power,” Deloitte researchers wrote in a press statement on the index. Although home prices continue to fall, Deloitte projected that “renewed efforts to forestall foreclosures coupled with a tax credit for home buyers may bring some stability to this market.” Write to Diana Golobay at

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