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The Consumer confidence index and short-term private consumption forecasting in Peru

Author

Listed:
  • Cuenca, Leonidas

    (Apoyo Consultoría)

  • Flores, Julio

    (Apoyo Consultoría)

  • Morales, Daniel

    (Rímac Seguros)

Abstract

The Consumer Confidence Index of APOYO Consultoría (INDICCA) is computed based on the responses to ten questions of a monthly survey in the city of Lima which aim to reflect the consumers’ spending intentions. We evaluate some sub-components of INDICCA in terms of their predictive and explanatory power of private consumption. In this process, we also evaluate the disaggregation on socioeconomic levels of this index, and a synthetic indicator of confidence based on dynamic factor models suggested by Jonsson and Lindén (2009) as an alternative way to combine the information contained in the sub-components of this index. We find that the explanatory and predictive power of private consumption models in Peru is enhanced when consumer confidence indices are included. However, this improvement is only marginal when other control variables such as employment or inflation are added. In particular, the optimal consumer confidence indicator is the synthetic indicator constructed with the dynamic factor model procedure. The results presented in this paper, although valid for some sub-components, are still inconclusive for the overall INDICCA.

Suggested Citation

  • Cuenca, Leonidas & Flores, Julio & Morales, Daniel, 2013. "The Consumer confidence index and short-term private consumption forecasting in Peru," Working Papers 2013-004, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2013-004
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    File URL: https://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2013/documento-de-trabajo-04-2013.pdf
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    Cited by:

    1. Hatice Gökçe Karasoy Can & Çağlar Yüncüler, 2018. "The Explanatory Power and the Forecast Performance of Consumer Confidence Indices for Private Consumption Growth in Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(9), pages 2136-2152, July.

    More about this item

    Keywords

    consumer confidence; consumer tendency surveys; private consumption; forecasting;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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