ShopperScape™ Future Spending Index: A Better Measure of Consumer Sentiment

There is a better answer for figuring out where consumer spending is headed. Best of all, it’s free.

Every month, journalists and analysts turn to popular measures of consumer sentiment to gauge where consumer spending is headed. Often, they are left scratching their heads or unknowingly misled. Those consumer measures might have their uses, but predicting consumer spending is not among them.

That’s why Retail Forward, which has more than 30 years' experience studying what drives consumers’ spending at retailers’ stores, decided to do better. The result is the ShopperScape™ Future Spending Index, a product of the economists, industry analysts and consumer researchers at Retail Forward.

Why is the ShopperScape™ Future Spending Index better?
The path of recent retail sales is a good illustration. From December 2003 through May 2004, U.S. retail sales surged. That surge, however, was not predicted by the Consumer Confidence Index from the Conference Board nor by the Consumer Sentiment Index from the University of Michigan. In fact, the Conference Board measure accelerated at the very point that sales began to slow.

In contrast, the ShopperScape™ Future Spending Index predicted the run-up in the sales pace from December to May. And it also foreshadowed the June let-up in the sales pace.

How is the Index constructed?
The index is designed to predict the movement of consumer spending one month in advance. It is based on Retail Forward’s monthly ShopperScape™ survey of 4,000 U.S. primary household shoppers. The monthly survey created by Retail Forward’s consumer researchers is conducted online among a nationally representative sample of households.

Retail Forward’s economists crafted the index from a select subset of questions from the ShopperScape™ survey that ask consumers to assess of key drivers of consumer spending. This includes how they view their situation with regard to their jobs, incomes, stock market investments, debt levels and home buying activity.

The index is actually built up from separate indices for Down Market, Middle Market and Up Market households, which tend to have very different retail spending behavior. The sub-index for each group is based on a separate mix and weighting of questions. For example, consumer reaction to stock market fluctuations will be much more important to Up Market households than Down Market households. As a result, we are able to determine which income group tends to be driving the movements in the overall Future Spending Index.

How can the index help you?
The latest Future Spending Index numbers are made available publicly each month in a press release and through a free ShopperScape™ electronic newsletter distributed by e-mail. Journalists and analysts are free to use the index results for newspaper articles or research as long as Retail Forward is cited.

The Index results can be used as an alternative for the existing measures of consumer confidence and sentiment. Or the Index can be used—in the context of prior month retail sales results reported by companies or the government—as a sign of where retail sales may be headed next month. Sign up » for the monthly ShopperScape™ newsletter.

To learn more about the benefits of becoming a ShopperScape™ member contact Katherine Clarke, Vice President of Marketing at 614.355.4009 or kclarke@retailforward.com ».