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Recent Revision of the European Consumer Confidence Indicator: Is There any additional Space for Improvement?

Author

Listed:
  • Ivana Lolić

    (Faculty of Economics and Business, University of Zagreb)

  • Marija Logarušić

    (Faculty of Economics and Business, University of Zagreb)

  • Mirjana Čižmešija

    (Faculty of Economics and Business, University of Zagreb)

Abstract

European Consumer Confidence Indicator (CCI) is conceptualized as a measure of prevailing consumer sentiment and a coincident indicator of private consumption. At the beginning of 2019, the European Commission (EC) changed the CCI’s methodology after more than 18 years of use, opening room for an evaluation. We construct an extensive set of more than 86 million alternatives to European CCI and provide detailed performance analysis focusing on correlations, residuals’ descriptive diagnostics, and success in tracking consumption’s direction of change. We propose inspecting the contribution of all survey questions (both 12 monthly and 3 quarterly), alternative monthly to quarterly transformations, alternative approaches to standardization, and allowing survey balances to enter the computation formula both with a positive and a negative sign. Almost all results imply that EC’s methodological change to new official CCI relies on stronger theoretical foundations and enhances the predictive power of CCI. The correlations with private consumption are higher than before while the success rate in tracking the direction of change is similar as before. However, the new CCI can be even more precise in capturing the direction of change up to 20–30%. Correlation values imply a possible improvement of up to 9% from the new CCI and suggest guidelines for further improvements. Expected spending on durable goods is the most relevant survey question for constructing CCI.

Suggested Citation

  • Ivana Lolić & Marija Logarušić & Mirjana Čižmešija, 2022. "Recent Revision of the European Consumer Confidence Indicator: Is There any additional Space for Improvement?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 159(3), pages 845-863, February.
    • Handle: RePEc:spr:soinre:v:159:y:2022:i:3:d:10.1007_s11205-021-02779-4
    DOI: 10.1007/s11205-021-02779-4
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