IDEAS home Printed from
   My bibliography  Save this article

Household consumption expenditures and the consumer confidence index


  • Katalin Bodnár

    () (Magyar Nemzeti Bank (central bank of Hungary))


Household consumption constitutes two thirds of GDP in Hungary. Accordingly, in addition to influencing expected economic growth, consumption plays a prominent role in shaping pricing behaviour. Consequently, understanding and forecasting the consumption processes as precisely as possible can be of key importance to the operations of the central bank. The consumer confidence index, which has the earliest release date of all indicators measuring the consumption behaviour of households, may help achieve this goal. In this article, I examine what the confidence index measures, what makes it closely related to developments in consumption, and to what extent it can be used in forecasting those developments. It is found that the confidence index is reasonably good at explaining variables such as household income, the economic situation of the country, unemployment and developments in inflation, but that it tends to track these variables, rather than forecast them. However, questions related to these variables are incapable of fully grasping consumption decisions. Use of composite indicators derived from the questions with the best explanatory power may contribute to the explanation of certain subindicators, but even this fails to significantly improve the precision of short-term forecasts. In addition to the current economic situation, the index also reflects the effect of political cycles.

Suggested Citation

  • Katalin Bodnár, 2010. "Household consumption expenditures and the consumer confidence index," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 5(1), pages 6-19, March.
  • Handle: RePEc:mnb:bullet:v:5:y:2010:i:1:p:6-19

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Seitz, Franz & Fischer, Björn & Köhler, Petra, 2004. "The demand for euro area currencies: past, present and future," Working Paper Series 330, European Central Bank.
    2. Peter Mooslechner & Helmut Stix & Karin Wagner, 2006. "How Are Payments Made in Austria?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 111-134.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Marija Kuzmanovic & Peter Sanfey, 2013. "Can Consumer Confidence Data Predict Real Variables? Evidence from Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 15(1), pages 5-24, April.
    2. repec:ebd:wpaper:151 is not listed on IDEAS

    More about this item


    consumption; forecasting; consumer confidence indicator.;

    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


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mnb:bullet:v:5:y:2010:i:1:p:6-19. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.