Learning About Consumer Uncertainty from Qualitative Surveys: As Uncertain as Ever

37 Pages Posted: 4 Sep 2015

See all articles by Santiago M. Pinto

Santiago M. Pinto

Research Economist; West Virginia University - Department of Economics

Pierre-Daniel G. Sarte

Federal Reserve Bank of Richmond

Robert Sharp

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: August 1, 2015

Abstract

We study diffusion indices constructed from qualitative surveys to provide real-time assessments of various aspects of economic activity. In particular, we highlight the role of diffusion indices as estimates of change in a quasi extensive margin, and characterize their distribution, focusing on the uncertainty implied by both sampling and the polarization of participants' responses. Because qualitative tendency surveys generally cover multiple questions around a topic, a key aspect of this uncertainty concerns the coincidence of responses, or the degree to which polarization comoves, across individual questions. We illustrate these results using micro data on individual responses underlying different composite indices published by the Michigan Survey of Consumers. We find a secular rise in consumer uncertainty starting around 2000, following a decade-long decline, and higher agreement among respondents in prior periods. Six years after the Great Recession, uncertainty arising from the polarization of responses in the Michigan Survey stands today at its highest level since 1978, coinciding with the weakest recovery in U.S. post-war history. The formulas we derive allow for simple computations of approximate confidence intervals, thus affording a more complete real-time assessment of economic conditions using qualitative surveys.

Keywords: Economic Uncertainty, Qualitative Data, Diffusion Index

JEL Classification: C18, C46, C83, D80, E32, E66

Suggested Citation

Pinto, Santiago M. and Sarte, Pierre-Daniel and Sharp, Robert, Learning About Consumer Uncertainty from Qualitative Surveys: As Uncertain as Ever (August 1, 2015). FRB Richmond Working Paper No. 15-09, Available at SSRN: https://ssrn.com/abstract=2654759 or http://dx.doi.org/10.2139/ssrn.2654759

Santiago M. Pinto

Research Economist ( email )

P.O. Box 27622
Richmond, VA 23261
United States

West Virginia University - Department of Economics ( email )

College of Business and Economics
1601 University Ave., Room #412
Morgantown, WV 26506-6025
United States
(304) 293-7871 (Phone)

Pierre-Daniel Sarte (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Robert Sharp

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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