Housing Recovery Spurs Home Improvement Spending

Worries over jobs, the economy and fiscal policy uncertainty have left consumers spending cautiously, prioritizing long-term goals and improvement projects, according to the Chase Freedom Lifestyle index report released on October 30.

Spending on home improvement and self-improvement saw year-over-year spending increases in Q3, while consumer electronics and office supplies saw the biggest declines in spending.  Home improvement spending rose 4%.  The housing recovery and increase in home values likely prompted consumers to increase their spending on remodeling and other improvements to their dwellings.

Craft stores saw the biggest surge in spending during the quarter with a 91% increase, a sign of "continued strength of do-it-yourselfers who may be buying a home or remodeling their current residence."  That is good news for home improvement retailers such as Home Depot and Lowe's, and hardwood flooring retailer Lumber Liquidators, which likely got their fair share of spending during the quarter.

Deep discounters such as Dollar Tree, Dollar General and Five Below, as well as Walmart and Target, which sell materials for arts and crafts, aldo tapped into some of that home improvement spending.

The index also shows that consumers are committed to self-improvement resolutions made earlier in the year, reflected in year-over-year spending increases on books at 6% and sporting goods at 5%.  Book sellers Barnes & Noble and Amazon.com likely captured some of those dollars.  Sporting good retailers such as Dick's Sporting Goods and athletic apparel outfits like Nike, Under Armour and Lululemon probably also benefitted from that spending.

Office supply and consumer electronics spending slipped 7% vs. a year earlier.  That is not good news for retailers like Staples and Best Buy - which is in the midst of a turnaround.  However, the report notes that the decline in spending on consumer electronics might be "a sign of calm before the holiday spending storm."

The Chase Freedom Lifestyle index is a quarterly barometer of consumer trends based on aggregated Chase Freedon cardholder spending.  Chase is the retail banking business of JP Morgan Chase.

Source:  Investor's Business Daily, www.investors.com