Consumer Spending Dips in June

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

“We expect consumer spending to plateau or slightly decline in June,” said Kurt Carlson, professor of marketing at Georgetown McDonough. “This may be reflecting some of the economic worries in the U.K. and Europe, along with a weak May jobs report. Overall, the index is up over 2015 and 2014, suggesting the economy is on the right path.”

The index decreased in June to 174.3, from May’s all-time high of 206.7, driven by a decrease in the amount consumers were planning to spend to solve their problems.

“This month’s down swing in the index is mainly due to a decrease in plans to spend in the home and housing and transportation categories,” Carlson said.

The PDCI, which uses non-seasonally adjusted data, remains up 38 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/PDCIjune16. For more information about the index, visit http://bit.ly/consumerproblems.