2016 Post-Holiday Spending Hangover Better Than in 2015
This year’s post-holiday hangover in consumer spending should be shorter than in 2015, according to the Georgetown Institute for Consumer Research. The institute’s Problem-Driven Consumption Index (PDCI) – based on the idea that consumers’ problems predict their purchases – suggests that spending in January and February will be substantially stronger than the same time last year.
The index predicts a slight downturn in spending from January to February, consistent with a similar pattern of post-holiday spending in previous years. The index is based on a survey of consumers that gauges the problems they intend to solve by going to the marketplace across nine major categories, including healthcare, home and housing, and transportation.
“The slight downturn in the PDCI aligns with what we observed in January 2015, only this year’s dip is less extreme, suggesting that retail spending should not fall quite as far in coming months as it did at this time last year,” said Kurt Carlson, director of the institute and professor of marketing at Georgetown University’s McDonough School of Business.
The index decreased in January to 160.0, from 173.9 in December 2015. The decrease in the PDCI stems from small decreases in the number of problems consumers were planning to solve and the amount of money they were planning to spend to solve them. The PDCI remains up year-over-year (it is up 39 percent relative to January 2015).
“The PDCI’s modest drop was broad-based across most of the categories that we track, but was disproportionately due to a decline in intention to solve problems in the transportation category,” Carlson said. “This suggests a relatively weak first quarter for transportation solutions.”
With more than 20 months of data, the PDCI can, by itself, significantly predict 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
The Georgetown Institute of Consumer Research derives 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/PDCIjan16. For more information about the index, visit http://bit.ly/consumerproblems.
About the Georgetown Institute for Consumer Research:
The Georgetown Institute for Consumer Research develops innovative, ground-breaking research to illuminate the challenges and opportunities of understanding and marketing to consumers. The institute seeks to impact business practice and improve consumer decision-making. For more information or to read the latest research from the institute, visit http://consumerresearch.georgetown.edu/.