Consumer Spending Continues Slight Decline
Researchers from Georgetown University’s McDonough School of Business predict consumer spending will continue to slightly decline from June to July. The Problem-Driven Consumption Index (PDCI) – based on the idea that consumers’ problems predict their purchases – suggests that, despite this month-to-month decline, consumer spending will be greater than July 2015.
“The index suggests that consumer spending will be down from its early summer peak, due to a decrease in plans to spend across all categories,” said Kurt Carlson, professor of marketing at Georgetown McDonough. “However, year-over-year, the index suggests that consumer spending will continue to increase over 2015 levels.”
The index – which measures consumers’ problems that require market solutions related to transportation, housing, healthcare, and other categories – decreased in July to 162.1, from June’s 174.3 and May’s 206.7. July’s level is driven by a decrease in the amount consumers were planning to spend to solve their problems.
The PDCI, which uses non-seasonally adjusted data, remains up 19 percent year-over-year. This increase is driven by a modest rise in the number of problems consumers plan to solve and by a substantial increase in the amount they plan to spend solving them.
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/PDCIjuly16. For more information about the index, visit http://bit.ly/consumerproblems.