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Does customer satisfaction have directional predictability for U.S. discretionary spending?

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  • Hamid Baghestani
  • Paul Williams

Abstract

Research indicates that past growth in customer satisfaction is an important factor in explaining the in-sample behaviour of growth in discretionary spending. Motivated by such evidence, we take an out-of-sample forecasting approach to examine whether customer satisfaction has directional predictability for two types of discretionary spending. These include spending on motor vehicles and spending on recreation services, which display frequent negative growth for the period 1995–2015. Our results indicate that customer satisfaction accurately predicts the direction of change in both types of spending under symmetric loss. To augment, we further show that the widely reported consumer sentiment has no directional predictability for either types of discretionary spending.

Suggested Citation

  • Hamid Baghestani & Paul Williams, 2017. "Does customer satisfaction have directional predictability for U.S. discretionary spending?," Applied Economics, Taylor & Francis Journals, vol. 49(54), pages 5504-5511, November.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:54:p:5504-5511
    DOI: 10.1080/00036846.2017.1311002
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    References listed on IDEAS

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