The Economy: New Index Shows Why Americans Keep Spending
Even though wavering U.S. stock and job markets gave consumers the jitters during the summer, they kept spending freely on cars and housing, and a new consumer-spending index produced by Deloitte Research helps to explain why.</br></br>Carl Steidtmann, Deloitte's chief economist, says economists spend too much time watching wiggles in monthly consumer-confidence measures -- which have recently slipped -- to try to gauge the outlook for spending. The more important indicator of the outlook for spending, he says, is long-term trends in the actual cash going into and out of people's pocketbooks. His index of cash flow is pointing up -- thanks to factors such as tax cuts, wage gains and increases in home prices -- suggesting that spending could strengthen, at least for the next few months.</br></br>"Consumers are wallowing in cash," says Mr. Steidtmann. Deloitte Research is a unit of Deloitte Touche Tohmatsu, an accounting and consulting partnership.</br></br>Data released by the government Friday underscored this argument. The University of Michigan said its monthly index of consumer confidence fell in August to 87.6 from 88.1 in July. A separate measure of confidence produced by the Conference Board was also down in August.</br></br>But consumer spending picked up after slowing down during the spring. In July, consumption rose 1% from the previous month, the Commerce Department said, largely because of a new outburst of spending on cars backed by 0% financing deals. Spending in July grew at a 6.7% annual rate from the second quarter, according to calculations by UBS Warburg.