"After a rebound during the first half of the year, the Index continued downward in August, primarily due to a drop in the price of new homes and a slight decline in the tax rate," said Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "Looking ahead, rising energy prices may further strain the Index heading into fall, as rising gas prices are already beginning to crimp spending."
Gasoline prices are at their highest level ever for this time of the year. Since July 4th, prices reported by the U.S. Department of Energy have climbed 43 cents per gallon, an unusual increase given that gasoline prices typically fade as the summer progresses. Additionally, Hurricane Isaac created another temporary price boost.
The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — fell to 3.13 from a downwardly revised reading of 3.22 the previous month.
"Retailers rode a steady wave of consumer spending this summer, but shopper enthusiasm could start to wane in the coming months especially as prices at the pump increase," said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader. "To get consumers' attention now and hold their interest and loyalty through the upcoming holiday season, retailers should highlight their blend of physical and virtual shopping experiences. By providing interactive, digital signage inside stores, mobile applications, and mobile point-of-sale functionality, retailers can make a strong impression on shoppers and encourage them to return whenever, wherever and however they wish."
Highlights of the Index include:
- Tax Burden: The tax burden fell slightly to 11.04 percent in the most recent month. A declining tax burden typically reflects weakening incomes.
- Initial Unemployment Claims: Jobless claims moved lower this month to 366,250 from 385,000 the previous month.
- Real Wages: Declining energy prices were not enough to offset weakness in nominal wage growth, leaving real wages flat.
- Real Home Prices: For the second month in a row, inflation adjusted new home prices declined, falling 3.85 percent from the previous month.