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Consumer spending expected to pick up soon

Mar 31, 2014 Quinn Thomas

Following the holiday season consumers generally pull back on spending to help ease the heightened level that occurs when buying gifts for friends and family as well as throwing parties. However, as temperatures warm and spring arrives, expenditures tend to pick back up.

In February, the Deloitte Consumer Spending Index remained flat, but all signs point to increases in the coming months.

"The fundamentals for consumer spending remain stable," said Daniel Bachman, Deloitte's senior U.S. economist. "While the economy continues to grow at a moderate pace, expect growth to accelerate over the next six to eighteen months, and the outlook for consumer spending to improve along with the economy."

Rising home values could boost spending power
In addition to moving away from the holiday season, another reason spending could begin to pick up is the fact that home prices continue to increase, which could bolster spending power.

In January, CoreLogic's Home Price Index Report revealed a 12 percent year-over-year jump, and 0.9 percent bump from December. The Pending HPI said prices should rise 12.5 percent on an annual basis in February, and 0.7 percent on a month-over-month basis.

"Polar vortices and a string of snow storms did not manage to weaken house price appreciation in January," said Dr. Mark Fleming, chief economist for CoreLogic. "The last time January month-over-month and year-over-year price appreciation was this strong was at the height of the housing bubble in 2006."

Short term lending demand could rise with consumer spending
Generally, consumers increase expenditures as personal financial situations improve, but that doesn't mean these people are free of money troubles. For example, if a person gets into a car accident following a major purchase, he or she could be in a position where it may be difficult to pay for car repairs and all other bills.

In such a situation, short term lending could prove beneficial. For this reason, heightened levels of consumer spending could spur short term lending demand. Many people are wary about these types of loans because of the negative press critics give them at times. It is said that high fees and interest rates can take advantage of borrowers, but that isn't the case. The amount people pay to secure a short term loan is often less than what would be paid in late fees and penalties if a bill payment is missed.