The quest for the best consumer confidence indicator
AbstractWe search through all possible consumer confidence indicators in order to find the single indicator that has the highest correlation with private consumption growth. Moreover, we contrast this indicator to the Consumer Confidence Indicator used by the European Commission, and some alternative indicators; also in terms of their predictive power of private consumption. In this context, we test the hypothesis that an indicator based on questions related to the household, rather than the general economy, would prove informative. We find that this "micro" indicator, as well as an optimal indicator that takes into account the specifics of all EU member states, outperform the current Consumer Confidence Indicator. Both these indicators also perform better than an indicator based on the popular factor methodology.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 372.
Length: 35 pages
Date of creation: Mar 2009
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The quest for the best consumer confidence indicator; consumer confidence; private consumption; predictive power; Jonsson; LindÃ©n;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
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