"This Spring we will see significantly higher spending as consumers enjoy the effects of last year's tax packages and receive higher than expected tax refunds," said Dr. Carl Steidtmann, Deloitte Research's chief economist and author of the monthly index. "A sustained reduction in unemployment claims, coupled with a continued rise in consumer spending, should create a stronger, more self-sufficient economy."

Highlights from the index, which attempts to track consumer cash flow as an indicator of future consumer spending, include:

• An additional five percent decrease in unemployment claims, down nearly 30 percent since April 2003, indicate job market growth and a more self-sustaining economy.
  
  
• The largest positive component of the index continues to be the sharp eduction in consumer tax burden. Taxes, as a share of income, have dropped by nearly a third since the beginning of 2002. Larger than expected tax refunds will add to consumer cash flow in the first half of 2004.
  
  
• Compensation increases are being consumed by rising health care costs. A further tightening of the labor market and relief from higher health care costs will be required before we see renewed upward pressure on real wages.
  
  
• Despite a home building boom, home prices fell slightly in December. Factors that may be contributing to the decline include:
  • The housing start number is at a 30-year record high, creating additional supply in the market and dampening the impact on prices.
  • Home price appreciation is slowing.
  • As the number of home sales increased, more lower income households are buying into the market, which tends to depress the overall state of the market.

The Deloitte Research Leading Index of Consumer Spending is comprised of four components: initial unemployment claims, tax burden, real home prices and real wages. The index slipped slightly to 4.80 percent in January from an upwardly revised 4.82 percent the previous month, due to the slowing effect of the tax reduction and increases in healthcare costs.