Nowcasting private consumption: traditional indicators, uncertainty measures, credit cards and some internet data

The focus of this paper is on nowcasting and forecasting quarterly private consumption. The selection of real-time, monthly indicators focuses on standard (“hard” / “soft” indicators) and less-standard variables. Among the latter group we analyze: i) proxy indicators of economic and policy uncertainty; ii) payment cards’ transactions, as measured at “Point-of-sale” (POS) and ATM withdrawals; iii) indicators based on consumption-related search queries retrieved by means of the Google Trends application. We estimate a suite of mixed-frequency, time series models at the monthly frequency, on a real-time database with Spanish data, and conduct out-of-sample forecasting exercises to assess the relevant merits of the different groups of indicators. Some results stand out: i) “hard” and payments cards indicators are the best performers when taken individually, and more so when combined; ii) nonetheless, “soft” indicators are helpful to detect qualitative signals in the nowcasting horizon; iii) Google-based and uncertainty indicators add value when combined with traditional indicators, most notably at estimation horizons beyond the nowcasting one, what would be consistent with capturing information about future consumption decisions; iv) the combinations of models that include the best performing indicators tend to beat broader-based combinations.