Consumer Attitudes, Buying Plans, and Purchases of Durable Goods: A Principal Components, Time Series Approach

Abstract

FOR more than ten years, the University of Michigan Survey Research Center has gathered data on consumer attitudes and buying plans in its periodic sample surveys. According to the SRC, Information on consumer sentiment and expectations is collected because they exert a great influence on demand for durable goods and housing and thereby on economic trends in general. 1 But tests of the relationship between attitudes, intentions, and consumer behavior have produced conflicting results and have caused doubts as to the usefulness of the attitude variables for purposes of forecasting.2 attitudes and buying plans data reflect various aspects of consumer sentiment. It is not clear to what extent these are separate attitudinal dimensions, and which of these, if any, have a useful role in forecasting. Analyses of the predictive power of attitudes and buying plans in cross section reinterview data have tended to discredit the relevance of attitudes, but not of buying plans. Klein and Lansing, Tobin, and others 3 have found that after predicting on the objective variables, the effects of the attitudinal variables individually (and combined into an index) are not statistically significant in the cross section. the other hand, intentions to purchase do add significantly to the explanation of realized purchases. Aggregate time series give the opposite result. While the earliest time series studies of aggregate data by the Consultant Committee on Survey Statistics, Okun, and Mueller 4 were inconclusive, more recently the Mueller studies and other calculations by the Survey Research Center5 have consistently shown that in aggregate time series, attitudes make a significant contribution to explaining fluctuations in aggregate durables purchases, while buying intentions do not make a statistically significant net contribution to the forecast. Proponents of the attitudes data have argued that the ultimate test of their usefulness is their performance as an aid to prediction in aggregate time series. case for or against the predictive value of consumer attitudes and intentions data is still open. This paper, part of a larger effort to reexamine the role of subjective data in predicting consumers' expenditures on durable goods, is focused on the behavior of the aggregate * author wishes to thank Professor Lawrence R. Klein for his encouragement and advice throughout this project. A number of willing assistants, M. J. Desai, M. W. S. Davenport, and J. J. Kim, helped with the computations. Survey Research Center kindly provided most of the data on which the study is based. work benefited from an institutional grant from the National Science Foundation. 1 Survey Research Center, Outlook for Demand (Ann Arbor, 1961), i. 2U.S. Congress, Joint Economic Committee, Consumer Survey in Reports of the Federal Reserve Consultant Committee on Economic Statistics (Washington, 1955); and Arthur M. Okun, The Value of Anticipations Data in Forecasting National Product, in National Bureau of Economic Research, Quality and Economic Significance of Anticipations Data (Princeton, 1960). 'L. R. Klein and J. B. Lansing, Decisions to Purchase Durable Goods, Journal of Marketing xx (Oct., 1955), 109-132. In this study, attitudinal responses indicating a feeling of well-being and indicating anticipation of price increase did show a significant relationship to purchases; James Tobin, On the Predictive Value of Intentions and Attitudes, Review of Economics and Statistics XLI (Feb., 1959), 1-11; Eva Mueller, Effects of Attitudes on Purchases, American Economic Review (Dec., 1957), 946-965; and Consumer Attitudes: Their Influence and Forecasting Value, in National Bureau of Economic Research, op. cit., 149-179. Also, F. Thomas Juster, Expectations, Plans, and Purchases: A Progress Report, Occasional Paper No. 70, National Bureau of Economic Research (New York, 1958); and with regard to automobile expenditures, Peter E. dejanosi, Factors Influencing the Demand for New Automobiles, Journal of Marketing (April, 1959), 412-418. 'U.S. Congress, Joint Economic Committee, op. cit.; Okun, op. cit.; and Mueller, op. cit. 'The most recent calculations are summarized in Survey Research Center, Fifteen Years of Experience with Measurement of Expectations (mimeo.) paper presented at the Meetings of the American Statistical Association (Sept., 1962, Minneapolis).