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NEW YORK — Consumers showed more confidence in October as a recovery in the housing market indicated a greater willingness to spend — especially among people who shop through multiple channels — but some headwinds remain, and the issues in Congress could threaten the gains, according to a new report by Deloitte.
The monthly Deloitte Consumer Spending Index rose significantly last month, to 4.02, from September's 3.54. The index measures tax burden, initial unemployment claims, wages and home prices.
"Rising consumer confidence should give retailers reason to celebrate during the holiday season, but the winds may shift in January, which should encourage retailers to make the most of this good news now," Deloitte vice chairman and retail and distribution sector leader Alison Paul said, referring to the so-called "fiscal cliff" of tax increases and spending cuts set to take effect on Jan. 1, 2013, unless Congress and the Obama administration can come to a budget agreement. "The consumers who appear most optimistic about their holiday spending are those who have been coined 'omnichannel' shoppers, or those who use all channels to shop, including mobile phones, online and the store."
Paul said those omnichannel consumers planned to spend 71% more on gifts than those who shop only in stores, while 45% planned to shop online. "These spending intentions give retailers reason to interact with consumers across physical and virtual storefronts to augment their messages and sales this holiday season," Paul said.
But some headwinds remain, according to the report. The tax burden increased slightly, but Deloitte noted that the rise is a sign of healthy growth in incomes. Meanwhile, rising prices for food and energy continued to weigh down on real wages, which fell slightly to $8.68. Jobless claims moved slightly higher, to 373,800, from 371,000 in September. But home prices increased, giving a lift to consumer confidence.
"The housing market appears to be recovering after bottoming out, while energy prices have begun to recede and lift some of the pressure on wages, boosting confidence and consumers' willingness to spend," Deloitte chief economist and author of the index Carl Steidtmann said. "This may only be sustainable over the long term if legislative issues are resolved, including the fiscal cliff and debt ceiling, as consumers will start to see their first tax increases at the beginning of the year."