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Determinants of Consumer Sentiment: Evidence from Household Survey Data

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  • Kajal Lahiri
  • Yongchen Zhao

Abstract

We study the information content of the five components of the University of Michigan¡¯s Index of Consumer Sentiment and identify the main determinants of these measures, using semiparametric ordered choice models and household data from the Surveys of Consumers from January 1978 to September 2012. Our findings suggest that consumers¡¯ own perceptions and expectations, as measured by other survey questions in the Surveys of Consumers, are the most important determinants of the sentiment index. After this set of factors is controlled for, consumers¡¯ demographic characteristics, aggregate macroeconomic variables, and professional forecasts account for little in addition. We also find that the sentiment components about the overall economic conditions are less sensitive to consumers¡¯ own views and characteristics than the components about consumers¡¯ household financial situations. These findings could motivate the use of consumer sentiment measures in a variety of applications, including forecasting consumption expenditures.

Suggested Citation

  • Kajal Lahiri & Yongchen Zhao, 2013. "Determinants of Consumer Sentiment: Evidence from Household Survey Data," Discussion Papers 13-12, University at Albany, SUNY, Department of Economics.
    • Handle: RePEc:nya:albaec:13-12
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    File URL: http://www.albany.edu/economics/research/workingp/2013/lz-sentiment.pdf
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    Cited by:

    1. Kajal Lahiri & George Monokroussos & Yongchen Zhao, 2016. "Forecasting Consumption: the Role of Consumer Confidence in Real Time with many Predictors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1254-1275, November.
    2. Dilyara Ibragimova, 2014. "Consumer Expectations Of Russian Populations: Cohort Analysis (1996–2009)," HSE Working papers WP BRP 41/SOC/2014, National Research University Higher School of Economics.

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