Now, where consumer spending is concerned, things looked a little gloomy for a while – especially after the dramatic 2.9% drop in U.S. gross domestic product (GDP) experienced in the first quarter this year; a decline blamed for the most part on the rough winter weather that socked in most of the country.
Yet the overall economy seems to have perked up a bit in the second quarter (I noted some of those trends here) and if consumer spending keeps heading upward, that should increase demand for truck capacity (something already in short supply.)
So first up is the Deloitte Consumer Spending Index, compiled by global consulting firm Deloitte LLP, which increased slightly in June this year – and indicator of what the firm calls “future consumer spending.”
"Strengthening home prices in May and a drop in unemployment claims put the Index in positive territory, showing a consumer's ability and willingness to spend," noted Daniel Bachman, Deloitte's senior U.S. economist. "Although wages are down slightly, there are enough indicators showing the labor market is back, which should offset the wage component's impact on household spending."
Deloitte’s index is comprised of four components – tax burden, initial unemployment claims, real wages and real home prices – and it increased to 3.78 in June from 3.67 back in May. Here are some of those metrics in detail:
- Tax Burden: The tax rate is holding steady for the seventh straight month with a marginal decrease to 11.7%.
- Initial Unemployment Claims: Claims – at 313,000 – declined 8.5% from the same period last year, and 2.4% from the prior month's rate of 320,000.
- Real Wages: Real hourly wages were up 0.5% from this time last year to $8.81, but slightly down by 0.2% from the prior month's reading of $8.82.
- Real Median New Home Price: New home prices rose 4.2% from the prior month to $119,000. Over the past 12 months they have risen 2.6%.
"Consumer sentiment is on the rise due to positive unemployment numbers and the so called 'wealth effect' of the stock market, and retailers should look to capitalize," noted Alison Paul, vice chairman for Deloitte LLP and the firm’s retail and distribution sector leader.
Yet a more cautious note is being sounded by data tracked by global marketing firm IRI Worldwide, which discerned in its latest MarketPulse survey.
Susan Viamari at IRI said that her firm’s poll found that consumer confidence – not spending but confidence – was relatively flat in the second quarter after dramatically increasing in the first quarter. Sentiment remains consistent for Millennials, while it dipped slightly among baby boomers and Generation Xers, she added.
“Even though the economy is gradually rebounding, consumers are cautiously optimistic about their financial health,” Viamari added. “We are seeing the ranks of those consumers who are experiencing and even expecting economic improvement slowly beginning to rise. Of particular note are Millennials, who have suffered more and longer than others, and are reporting that they have been feeling more comfortable for the last two quarters. Time will tell, but, for now, this indicates that the stabilization of the economy is reaching a bit deeper across consumer segments.”
IRI is terming its latest stats an indication of “optimism with a pinch of skepticism,” for just as the U.S. economy is slow to rebound, the same can be said for consumers’ confidence. For now, 16% of consumers surveyed by IRI say they feel “a little better” about their current financial situation with skeptics becoming fewer in number as 22% indicate they feel “a little worse.”
Yet consumers across the board are expecting their home values, value of investments as well as their ability to save improve in the coming year, which should help give a boost to their “economic confidence,” Viamari said.
“Seeing your nest egg not only stabilize but grow goes a really long way in boosting confidence,” she added. “Consumers are feeling a bit more comfortable about loosening their grip on the purse strings, but they will be very pragmatic about increased spending and splurging.”
IRI’s MarketPulse survey also illustrates that while spending cutbacks remain widespread, they are easing a bit. Simultaneously, there is an uptick in what the firm calls “splurge behaviors” as well:
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Q2 2011 |
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Q2 2014 |
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• Cutting back on nonessential items |
60% |
51% |
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• Buying more private label than previously bought |
47% |
43% |
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• Trying new brands priced below regular brands |
46% |
39% |
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• Giving up some favorite brands |
39% |
31% |
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• Buying fewer healthier products because more expensive |
31% |
28% |
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• Treating self to small indulgences to ease stress |
31% |
31% |
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• Splurging on premium or gourmet products |
19% |
22% |
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• Purchasing only preferred brand, though others less expensive |
12% |
15% |
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“A critical takeaway from our latest MarketPulse survey is that, while optimism is emerging, consumers’ continued commitment to find maximum value is as strong as ever,” Viamari emphasized. “One-third of consumers tell us that they will continue to shop multiple stores to find the lowest prices.”
We’ll see how that all plays out in terms of freight demand over the coming months.
