Consumer Spending Springs Upward in March

Researchers from Georgetown University’s McDonough School of Business predict an increase in consumer spending from February to March. The Problem-Driven Consumption Index (PDCI) – based on the idea that consumers’ problems predict their purchases – predicts that consumer spending also will be greater than March 2015.

The index is determined by a monthly survey of consumers that gauges the problems on which they plan to spend money across nine major categories, including healthcare, home and housing, and transportation.

“We expect consumer spending in March to be up from earlier levels this year,” said Kurt Carlson, professor of marketing at Georgetown McDonough. “In addition, we also expect to see greater spending than this time in 2015, which is good news for the economy. The upswing in the index is mainly due to an increase in plans to spend on attire, home and housing, social, and personal care problems. We expect spending to increase in those categories, compared to the other categories we measure. At the same time, the index suggests small decreases in the work and life, health, and communication categories.”

The index increased in March to 170.7, from February’s level of 153.5. The increase in the PDCI stems from a small increase in the number of problems consumers were planning to solve and a larger increase in the amount they were planning to spend to solve them. The PDCI, which uses non-seasonally adjusted data, remains up 20 percent year-over-year.

With more than two years of data, the PDCI predicts monthly retail spending. The index goes beyond measuring confidence or sentiment to study the problems in the marketplace and how consumers plan to solve them.

Carlson and Chris Hydock, assistant professor of research, derive the PDCI from responses to the Consumer Problem Survey (CPS). The CPS is a monthly survey of a nationally representative sample that measures consumers’ problems that require market solutions, thereby allowing the institute to track the quantity of, severity of, and the types of problems that consumers experience. By measuring and tracking the problems that cause consumers to enter the marketplace in search of solutions, the CPS provides entirely new insights into when and how consumers are likely to enter the market to solve their problems. To view the full report, visit http://bit.ly/PDCImar16. For more information about the index, visit http://bit.ly/consumerproblems.