The Three Blind Spots in How Consumer Sentiment Is Measured

Core Insights - Consumers have consistently predicted economic trends more accurately than experts, indicating a disconnect between traditional economic models and actual consumer behavior [2][5][47] - The upcoming PYMNTS Consumer Expectations Index (PCEI) aims to address the gaps in measuring consumer sentiment that traditional methods fail to capture [26][30] Consumer Behavior and Sentiment - Consumers have shown a tendency to prioritize essential expenses over discretionary spending, with 68% of American households living paycheck to paycheck [7][20] - Traditional sentiment measures do not account for the long-term impact of inflation, leading to a persistent feeling of financial stress among consumers despite macroeconomic indicators suggesting recovery [11][14] - The relationship between income and spending behavior has weakened, with many high-income earners also reporting living paycheck to paycheck due to fixed obligations and debt [17][18] Structural Gaps in Economic Measurement - The original methodology for measuring consumer sentiment is outdated, failing to capture the complexities of modern financial lives [10][48] - Three key blind spots identified include: 1. The permanent damage from inflation, which has not returned to pre-2021 levels [11][12] 2. The unreliable correlation between income and spending behavior due to varying financial structures [15][19] 3. The distinction between employment rates and job security, which affects consumer spending decisions [21][23] PYMNTS Consumer Expectations Index (PCEI) - The PCEI will launch in March 2026, designed to provide a more nuanced understanding of consumer sentiment by incorporating structural constraints such as debt manageability and savings capacity [27][30] - The index will measure consumer sentiment across 11 dimensions, aiming to reflect both feelings and the ability to act on those feelings [29][30] Recent Data Insights - February's PCEI data indicates cautious optimism among consumers, with a score of 51.5, but reveals significant disparities based on financial stability and generational differences [32][37] - Job security perceptions show a high score of 83.5, but confidence in finding comparable work drops to 48.0, highlighting a gap between perceived security and actual job market conditions [41][42] - Consumers are managing debt and maintaining employment but are doing so with caution, indicating a fragile financial foundation [46][48]