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Consumer Spending Indicator Drops in October

cutting-moneyConsumer spending indicators slipped in October, losing momentum after two months of consecutive increases.

Deloitte's Consumer Spending Index, a gauge of cash flow as a measure of future spending, came in at 4.1 in the firm's October reading, down from 4.4 in September.

Of the four components that make up the index, two contributed to the headline decline: New home prices, which fell 9.8 percent month-over-month to a median $109,000, and real hourly wages, which dipped 0.1 percent to $8.84.

"The decrease in the real median new home price mainly contributed to the decrease in the Index this month," said Deloitte senior U.S. economist Daniel Bachman. "But the fundamentals behind consumer spending remain strong."

Of the other two indicators, one saw a modest improvement, while one remained steady.

According to Deloitte, initial unemployment claims "marginally decreased" in October, dropping to 295,000 from 303,000 in September and ending up 9.7 percent down from the same time last year.

Meanwhile, consumers' tax burden was unchanged, with the tax rate staying flat at 11.8 percent.

Though the headline index turned down last month, other economic indicators point to a pickup in consumption growth for the fourth quarter.

The latest reading on consumer sentiment from the University of Michigan and Thompson Reuters beat expectations, climbing to 89.4 on declining fuel prices and stronger labor numbers.

"Despite a slight dip in home prices, consumers appear to be poised for some strong spending this season with lower gas prices and employment gains strengthening their confidence," said Alison Paul, vice chairman of Deloitte and sector leader for retail and distribution.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.

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