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May 1, 2007
"With initial unemployment claims up in recent weeks, the labor market is showing some early signs of weakening, which could put pressure on consumer spending," says Carl Steidtmann, chief economist with Deloitte Services and author of the monthly index. "Home prices continue to be weak. However lower mortgage rates are giving a boost to mortgage applications and there are some signs that the housing market is stabilizing. The coming months will show how the labor and housing markets evolve and their combined affect on consumer spending."
The index, which is comprised of four components (tax burden, initial unemployment claims, real wages and real home prices) fell to 3.28 percent from an upwardly revised gain of 3.84 percent the month before. "In this environment, retailers also have a balancing act," says Pat Conroy, a vice chairman of Deloitte & Touche USA LLP and national managing principal of its consumer business industry practice. "They need to focus on the cost side of the business."
This includes making sure that inventories are not out of line and monitoring labor costs, Conroy advises. However, "Retailers must also ensure in-stock positions for the products their customers want to buy, match store staffing with shopper traffic, and improve selling behaviors in order to convert shoppers into buyers. These levers can exert opposing forces on a business or, done right, they can help maximize sales and earnings," he points out.
Highlights of the index, which tracks consumer cash flow as an indicator of future consumer spending, include:
Topic: Business Strategies
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