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Can Consumer Confidence Forecast Household Spending? Evidence from the European Commission Business and Consumer Surveys

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  • John A. Cotsomitis
  • Andy C. C. Kwan

Abstract

This paper represents a first formal attempt to examine the ability of consumer confidence to forecast household spending within a multicountry framework. To this end, we use two confidence indices, namely the Consumer Confidence Indicator and the Economic Sentiment Indicator, both of which are derived from the European Commission Business and Consumer Survey. As in previous single‐country investigations, we find that there is much variability in the in‐sample incremental forecasting performance of the confidence indices for the countries canvassed. Further, the results of our out‐of‐sample tests indicate that the confidence indices considered provide limited information about the future path of household spending.
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Suggested Citation

  • John A. Cotsomitis & Andy C. C. Kwan, 2004. "Can Consumer Confidence Forecast Household Spending? Evidence from the European Commission Business and Consumer Surveys," Departmental Working Papers _161, Chinese University of Hong Kong, Department of Economics.
    • Handle: RePEc:chk:cuhked:_161
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    Cited by:

    1. Zhongchen Song & Tom Coupé, 2023. "Predicting Chinese consumption series with Baidu," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 21(3), pages 429-463, July.
    2. Aneta M. Klopocka & Rumiana Gorska, 2021. "Forecasting Household Saving Rate with Consumer Confidence Indicator and its Components: Panel Data Analysis of 14 European Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 874-898.
    3. Pär Österholm, 2010. "Improving Unemployment Rate Forecasts Using Survey Data," Finnish Economic Papers, Finnish Economic Association, vol. 23(1), pages 16-26, Spring.
    4. Bengt Assarsson & Pär Österholm, 2015. "Do Swedish Consumer Confidence Indicators Do What They Are Intended to Do?," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 61(4), pages 391-404.
    5. Yasemin Özerkek & Sadullah Çelik, 2010. "The Link between Government Spending, Consumer Confidence and Consumption Expenditures in Emerging Market Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(4), pages 471-485, December.
    6. Hüseyin Kaya & Sadullah Çelik, 2009. "Empirical Evidence For Day Of The Week Effect In An Emerging Market: The Turkish Case," 2009 Meeting Papers 219, Society for Economic Dynamics.
    7. Lenka Mynaříková & Vít Pošta, 2023. "The Effect of Consumer Confidence and Subjective Well-being on Consumers’ Spending Behavior," Journal of Happiness Studies, Springer, vol. 24(2), pages 429-453, February.
    8. Dimitriou Dimitrios & Pappas Anastasios & Kazanas Thanassis & Kenourgios Dimitris, 2021. "Do confidence indicators lead Greek economic activity?," Bulletin of Applied Economics, Risk Market Journals, vol. 8(2), pages 1-15.
    9. Javier Jareño, 2007. "Opinion-based surveys in the conjunctural analysis of the Spanish economy," Occasional Papers 0706, Banco de España.
    10. Luca Zanin, 2010. "The relationship between changes in the Economic Sentiment Indicator and real GDP growth: a time-varying coefficient approach," Economics Bulletin, AccessEcon, vol. 30(1), pages 837-846.
    11. Robert Gausden & Mohammad S. Hasan, 2016. "Would information on consumer confidence have helped to predict UK household expenditure during the recent economic crisis?," Applied Economics, Taylor & Francis Journals, vol. 48(18), pages 1695-1709, April.
    12. Willem Vanlaer & Samantha Bielen & Wim Marneffe, 2020. "Consumer Confidence and Household Saving Behaviors: A Cross-Country Empirical Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(2), pages 677-721, January.

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