Does Consumer Confidence Forecast Household Expenditure? A Sentiment Index Horse Race

20 Pages Posted: 23 Oct 2007

See all articles by Jason Bram

Jason Bram

Independent

Sydney C. Ludvigson

New York University - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

This article is the first formal investigation of consumer attitudes that compares the forecasting power of the University of Michigan's Index of Consumer Sentiment and the Conference Board's Consumer Confidence Index. The authors find that measures available from the Conference Board have both economically and statistically significant explanatory power for several categories of consumer spending. By contrast, measures available from the University of Michigan generally exhibit weaker forecasting power for most categories of spending. As part of their analysis, the authors examine the ways in which the surveys underlying these measures differ and test whether certain types of survey questions are particularly important for predicting consumer spending.

Keywords: consumber confidence, household expenditures

JEL Classification: D1, E21, E27

Suggested Citation

Bram, Jason and Ludvigson, Sydney C., Does Consumer Confidence Forecast Household Expenditure? A Sentiment Index Horse Race. Economic Policy Review, Vol. 4, No. 2, June 1998, Available at SSRN: https://ssrn.com/abstract=1023933

Sydney C. Ludvigson

New York University - Department of Economics ( email )

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HOME PAGE: http://www.econ.nyu.edu/user/ludvigsons/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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