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Consumer Confidence and Consumer Spending

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  • Sydney C. Ludvigson

Abstract

Despite the widespread attention given to surveys of consumer confidence, the mechanisms by which household attitudes influence the real economy are less well understood. This paper begins with an overview of how consumer confidence is measured and reported. It then evaluates the relationship between consumer attitudes and the real economy. The evidence suggests that popular survey measures contain some information about future aggregate consumer expenditure growth. However, much of that information is found in other economic and financial indicators, and the independent information provided by consumer confidence predicts a relatively modest amount of additional variation in future consumer spending.

Suggested Citation

  • Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
  • Handle: RePEc:aea:jecper:v:18:y:2004:i:2:p:29-50
    Note: DOI: 10.1257/0895330041371222
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/0895330041371222
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    References listed on IDEAS

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    1. Jason Bram & Sydney Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 59-78.
    2. Mankiw, N. Gregory, 1982. "Hall's consumption hypothesis and durable goods," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 417-425.
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