Weak Housing Market Puts Damper On Consumer Spending

Cold weather and a considerably weak housing market contributed to a drop in the nation’s consumer spending last month, experts say in a new report.

Deloitte Research Leading Index of Consumer Spending in March, and the Index’s author warned the housing market situation - spurred onward by troubled bad credit mortgage loan providers - may continue to dampen the nation’s consumer spending outlook.

Freezing February temperatures across the country contributed to softness in retail sales and construction in March, said Carl Steidmann, Deloitte Research’s chief economist and index author, in a news release.

“On top of that, the overall weakness in the housing market continues to be a concern,” he said.

A high inventory of unsold new homes and tightening lending standards in the wake of the subprime (bad credit home loan) crisis will slow down improvements in the housing market, he said.

“The housing situation is having a distinct impact on consumers’ net worth, although rising stock values are picking up some of the slack,” Steidmann said.

A strengthening job market is also boosting wages.

The Index tracks consumer cash flow as an indicator of future consumer spending in four areas - tax burden, initial unemployment claims, real wages and real home prices.

According to recent data, the index tumbled to 3.06 percent, from an upwardly revised gain of 3.34 percent a month ago.

However, improving weather will help retailers bring more consumers to stores, said Pat Conroy, a vice chairman of Deloitte & Touche USA LLP.

Deloitte research has shown that “customers would like in-stock positions for the products they want to buy, as well as available, knowledgeable sales associates to help them locate items and make decisions.”

Will warmer temperatures spur consumer spending in April? Or will continued uncertainty in the housing and bad credit mortgage markets continue to put a damper on growth? Stay tuned.

SOURCE: Reuters