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Consumers to Boost Summer Spending

Retail Forward’s Future Spending Index improved to 99.1 in June from 96.6 last month, indicating consumers are in a better spending mood as the summer season approaches.

“Despite fears that consumers are finally throwing in the towel, this month’s results show that consumers’ desire to shop remains intact,” said Steve Spiwak, an economist with Retail Forward, a global management consulting and market research firm specializing in retail intelligence and strategies. “Job growth, home buying and the recent stock market run up are providing a solid foundation for near-term spending prospects.”

Father’s Day spending should contribute somewhat to the pickup in overall spending plans, driven mostly by stronger spending on Dad among Up Market households. Cards, clothes and consumer electronics top the list of Father’s Day gifts.

Other ShopperScape results show that the soaring housing market is stoking home improvement project spending, with the do-it-yourself crowd driving much of that spending. Not surprisingly, Home Depot and Lowe’s are the primary beneficiaries of the home improvement binge, but don’t count out Wal-Mart among Down Market do-it-yourselfers, according to Retail Forward.

Middle Market households, which account for nearly half of overall consumer spending, drove June spending prospects higher. Spending plans among Down Market households slipped modestly, while plans among Up Market households held nearly steady, according to the report.

Below are highlights from the Retail Forward report:

• The June Future Spending Index for Middle Market households (those between $22,500 and $75,000 in annual income) rose to 100.1 in June from 93.9 in May. This income segment is much more optimistic about the job situation and income growth. Moreover, the recent drop in mortgage rates has bolstered home buying and refinancing activity for this group, providing added confidence to spend.

• Heightened optimism about jobs and incomes along with an increase in investment worth balanced greater debt concerns and a falloff in home buying for Up Market households (incomes greater than $75,000). As a result, the index for this income group was essentially unchanged at 97.2 in June.

• The index for Down Market households (those with incomes less than $22,500 in annual income) moderated a bit to 101.1 in June compared with 102.3 the month before. The volatile job market recovery is taking a disproportionate toll on this segment, though a jump in refinancing activity and investments cushioned the June falloff.

The Retail Forward ShopperScape survey is conducted each monthly online with a representative sample of 4,000 U.S. primary household shoppers. This month’s survey was conducted during the last week of May 2005.

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