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Forecasting Consumption in Real Time: The Role of Consumer Confidence Surveys

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  • Kajal Lahiri
  • George Monokroussos
  • Yongchen Zhao

Abstract

We study the role of consumer confidence surveys in forecasting personal consumption expenditure. We reexamine existing models of consumption and consumer confidence using both quarterly and monthly data in real time. Additionally, we produce forecasts of consumption expenditures with and without consumer confidence measures using a dynamic factor model and a real-time, jagged-edge data set. We establish in a robust way that consumer confidence significantly improves the accuracy of consumption forecasts. Furthermore, traditional macroeconomic theories seem to be unable to fully account for these results.

Suggested Citation

  • Kajal Lahiri & George Monokroussos & Yongchen Zhao, 2012. "Forecasting Consumption in Real Time: The Role of Consumer Confidence Surveys," Discussion Papers 12-02, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:12-02
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    File URL: http://www.albany.edu/economics/research/workingp/2012/lmz-consent.pdf
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    References listed on IDEAS

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    Cited by:

    1. Hatice Gökçe Karasoy Can & Çağlar Yüncüler, 2018. "The Explanatory Power and the Forecast Performance of Consumer Confidence Indices for Private Consumption Growth in Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(9), pages 2136-2152, July.
    2. John Khumalo, 2014. "Consumer Spending and Consumer Confidence in South Africa: Cointegration Analysis," Journal of Economics and Behavioral Studies, AMH International, vol. 6(2), pages 95-104.

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