New Deloitte Research Leading Index of Consumer Durables Spending Forecasts Weakness

NEW YORK, Jan. 30 /PRNewswire/ -- The Deloitte Research Leading Index of Consumer Durables Spending, introduced last month and applied retroactively to prior periods, declined for the fourth consecutive month, providing strong indication of future weakness in consumer spending on durables. Based on retroactive analysis, the index would have accurately forecasted changes in personal consumption expenditures on durable goods 72 percent of the time between January 2004 and July 2007 (31 months out of 43 months). This index is a complement to the Deloitte Research Leading Index of Consumer Spending, which tracks consumer cash flow as an indicator of future consumer spending.

"The index turned negative in September of 2007 and has declined ever since, with an especially steep decline in December," said Ira Kalish, director, global economics and consumer business, of Deloitte Services LP's ("Deloitte") Deloitte Research, and author of the monthly index. Kalish noted that, "all four components of the index moved in a negative direction in December. When the overall index moves in one direction for two or more consecutive months, it has been shown to accurately predict the movement in the PCE-D, or Personal Consumption Expenditures on Durables. Consequently, the four month decline in the index suggests that, in the next few months, there will be significant weakness in consumer spending on consumer electronics, furniture, appliances, cars, home improvement products and other big ticket items."

"The index is in line with expectations about the economy, and indicates that consumer product companies may need to alter their strategies to meet the demands of this environment," comments Pat Conroy, Deloitte's U.S. Consumer Products Leader. "These companies will face a more difficult market share battle in the coming months, and will need to differentiate their products in a crowded and transparent market. Successful companies will focus on building strong brands in order to forge strong relationships with both major retail customers and consumers."

The index is composed of four components -- consumer price index, initial unemployment claims, real wages and new homes sold:

    -- Consumer Price Index (for Urban Consumers): This captures the negative
       effect of rising prices on nominal spending on durables.
    -- Initial claims for unemployment insurance: This captures the effect of
       the labor market. A rise in unemployment insurance claims leads to a
       decline in spending on durables.
    -- Real hourly earnings: This captures the positive effect of rising
       income on willingness to spend on durables.
    -- New single family houses sold: This captures the positive effect of the
       housing market on durables spending, with a six month lag.

For more information about Deloitte & Touche USA's Consumer Products group, please visit www.deloitte.com/us/cpg.

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