Home Prices Give Lift to Consumer Spending

A significant increase in home prices helped push ""Deloitte's"":http://www.deloitte.com/view/en_US/us/index.htm Consumer Spending Index up in September, the company reported.

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The index, which tracks consumer cash flow as an indicator of future consumer spending, rose to 3.53 from 3.27 in August. A substantial 10.5 percent bump in housing prices accounted for much of the overall increase.

""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, chief economist at Deloitte and author of the monthly index. ""The increase may also provide a much-needed boost to consumer confidence as other hurdles lie ahead.""

While the boost in home prices may not provide the most accurate picture of the market, as Steidtmann suggests, it did make up for weaknesses in other areas of the index.

Personal income and spending data for August were ""disappointing,"" Deloitte said, with real income dropping 0.3 percent from the previous month and spending increasing only 0.1 percent. While overall spending is up 2.0 percent year-over-year, Deloitte described growth in the past three months as ""tepid,"" falling 0.1 percent in June before rising 0.37 percent and 0.08 percent in July and August, respectively.

Energy prices have also been a concern. Gas prices have continued to increase in autumn, a time that usually sees price declines as the summer driving season ends. Meanwhile, the rollercoaster labor market ""remains a drag on the Index and the broader economy.""

Additionally, political issues have turned consumers' focus away from spending, said Alison Paul, vice chairman of Deloitte LLP and retail and distribution sector leader.

""The ups and downs in housing, employment and energy costs may have given customers pause this past month,"" Paul said. ""As the holidays get into full swing, however, we anticipate shopper enthusiasm will be renewed. Turning their attention away from politics after the election, consumers can get back into the business of shopping.""