Housing market boosts consumer spending index

The Deloitte Consumer Spending Index rose to 3.53 in September, from a reading of 3.27 the previous month, based largely on the strength of the housing market. The index, which tracks consumer cash flow as an indicator of future consumer spending, attributed its growth primarily to the nearly 11% increase in home prices, which offset weakness in other areas. Besides home prices, the index is also based on tax burden, initial unemployment claims and real wages.

"The sizable increase in home prices may overstate the strength of the real estate market, though on a positive note, the declines may be over and the market stabilizing," said Carl Steidtmann, Deloitte's chief economist and author of the monthly index. "The increase may also provide a much-needed boost to consumer confidence as other hurdles lie ahead. Consumer spending growth has slowed, and the primary reason that it is flat but not declining is that households are putting less into their savings. Energy prices remain a drag on household incomes, and rising prices account for the largest month-to-month drop in real wages since September 2005."

Highlights of the index include:

Tax burden: The tax burden rose slightly in the most recent month to 11.05%. A rising tax burden is often a sign of healthy income growth.

Initial unemployment claims: Jobless claims moved higher this month to 371,000 and were 2% higher than this time last year.

Real wages: Rising energy prices sent real wages tumbling to $8.71 -- the largest month-to-month drop since September 2005.

Real home prices: In a thin market, housing prices can be volatile as the mix of homes sold becomes more significant. Real home prices soared 10.5% in the latest month, accounting for all of the gain in the index.

Deloitte's retail and distribution practice provides audit, consulting, risk management, financial advisory and tax services to 80% of the Fortune 500 retailers, according to the company.