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RISMEDIA, December 11, 2009—The Deloitte Consumer Spending Index rose in November 2009 to its highest level since 2004, driven largely by the decrease in initial unemployment claims along with historically low tax levels. The Index attempts to track consumer cash flow as an indicator of future consumer spending.

“The Index continues a recent six-month climb due to improvement across the board in consumer fundamentals,” said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP, and author of the monthly Index. “Real earnings remain on the rise due to falling prices while the housing market continues to show signs of stabilizing. A decline in initial unemployment claims has historically been a reliable signal of economic recovery, and in recent months, initial claims have continued downward. These factors may give retailers and suppliers reason for optimism going forward.”

The Index, comprising four components- tax burden, initial unemployment claims, real wages and real home prices- rose to 4.63%, from an upwardly revised gain of 4.25% a month ago.

“While the recent gains in consumer spending have been encouraging, they are on the moderate side as a result of ongoing consumer caution,” said Stacy Janiak, vice chairman and Deloitte’s U.S. Retail leader. “With household credit conditions remaining weak, retailers may consider offering financing or other services to provide consumers with needed access to credit, along with convenient and flexible payment terms. These services may include layaway, co-branded store cards, online payment options and deferred billing, for example.”

Highlights of the Index include:

Tax Burden: The tax burden has stabilized in recent months. The average tax burden is at its lowest level in more than 40 years due to the effects of the stimulus bill passed in February.

Initial Unemployment Claims: Initial claims have declined sharply over the past three months, which historically has been a reliable signal of economic recovery. Claims are down more than 200,000 from their recession peak.

Real Wages: Real wage growth continues to post solid gains due in large part to falling prices. Real wages are up 3.9% from a year ago as falling prices have given a big boost to consumer purchasing power. This is the single largest contributor to the rise in the index.

Real Home Prices: The pace of decline in home prices has slowed significantly on a year over year basis. Continued efforts to forestall foreclosures coupled with the extension of the tax credit for first time home buyers have brought some stability to the home prices. The decline in home prices has made home buying much more affordable.

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