Consumer spending drops as year winds down

More consumers may be concerned about their credit rating, as the level of consumer spending declined in November. This may have a negative effect on many consumers, especially if they are trying to get debt under control.

Overall consumer spending fell due to a slowdown in real wages, as well as a spike in home prices, according to a report from Deloitte. The firm's Consumer Spending Index dropped to 3.89 last month, a decline from October's figure of 4.14. Wages declined to $8.66, which was due to increased energy costs, as well as higher prices for food products. Meanwhile, the tax burden dropped to approximately 11 percent, which signified a slowdown in income growth.

Much of the issues with consumer spending are due to the residential housing market, which experienced a leveled sales situation earlier this year, the report explained. There are many issues with inventory, but a significant amount of new homes should enter the market in the coming months. This may slow home sales overall, as well as price gains. However, home prices were still more than 3 percent higher in November than during the same period in 2011.

"After a period characterized by improving housing data and waning energy prices this fall, the underlying fundamentals for consumer spending are beginning to deteriorate," said Carl Steidtmann, chief economist of Deloitte and author of the monthly Index. "However, the impact may not be felt until the beginning of 2013. While the fiscal cliff debate continues, it is unlikely to significantly weigh down holiday season sales."

Incomes also dropped throughout the past several months. The report explained that real disposable income fell approximately $20 billion.

Hurricane Sandy may further hurt spending figures
There could still be an effect on the consumer spending situation from Hurricane Sandy, but this was not included in the findings, the report noted. However, overall spending for October fell by 0.3 percent. With these things in mind, a continued drop in spending may have a significant effect on the country's Gross Domestic Product Growth, as more than two-thirds is dependent on this type of spending.

In order to improve the consumer spending situation, retailers may need to discount products to help consumers continue to feel confident, the report explained.

"Retailers are positioned to finish the holiday season on a high note, but the outlook for the New Year puts added pressure on them to outperform ahead of a possible slowdown in January," said Alison Paul, vice chairman of Deloitte and retail and distribution sector leader. "Their focus should now be on engagement, keeping the customer's attention and driving repeat trips via online, mobile and store channels. Using analytics capabilities, retailers can stay sharp on promotions and markdowns to move inventory and keep levels low heading into the beginning of the year. That data should also help them determine when to dial-up staffing levels to match traffic peaks and put forward their best service to assist customers and increase holiday sales."

Personal income improves in November
Despite these lingering issues, a report from the Department of Commerce showed that personal income strengthened in November, which may mean more consumers will have the liquidity to pay off bills and strengthen their credit rating.

Overall personal income rose 0.6 percent, which was a gain of $85.8 billion, the Personal Incomes and Outlays report for November noted. This was improved from the 0.1 percent improvement in October, which came to $7.5 billion.

There was also a 0.4 percent jump in personal consumption expenditures, which was more than $41 billion. This figure fell 0.1 percent, for a total drop of $6.6 billion the previous month.

Disposable personal income jumped 0.6 percent last month, for a total improvement of nearly $75 billion, the report explained. This was much higher than the 0.1 percent gain in October, which totaled $6.4 billion.

The report added that real disposable income rose 0.8 percent last month, which was significantly higher than the 0.1 percent drop recorded in October. Real personal consumption expenditures improved 0.6 percent, also a stark rise after October's 0.2 percent decline.

Continued improvements in personal spending and wages may help consumers get a better handle on their savings situations. However, there are still issues present for many consumers. Those who still need some help tackling their debts may want to contact Lexington Law Firm. This may help those who need a credit fix, as it could increase the chances of improving their credit score.