Consumer spending in March fell by 1.3 percent to a six-year low, dragged down by weaker income growth and sagging home values, Deloitte reported this week.

Over the first quarter, consumer spending fell by 26.7 percent compared to the same period last year. The declines were blamed on slower income growth and rising unemployment, the New York-based research firm reported. At the same time, home prices have dropped by 12 percent.

"The current economic downturn is as significant as anything we have seen since the last recession," Carl Steidtmann, the firm's chief economist, said in a statement.

With consumers acting more frugal amid rising food and energy prices, retailers are facing increased competition for a share of the federal tax rebate checks mailed out earlier this month, researchers said.

"It is a full-fledged battle right now that is only going to get more fierce as gas prices continue to rise toward their typical Memorial Day peak," Stacy Janiak, head of Deloitte's U.S retail division, said in a statement.