CONSUMER CONFIDENCE INDICES AND SHORT‐TERM FORECASTING OF CONSUMPTION*

Abstract

There is growing interest in examining the short‐term link between survey‐based confidence indicators and real economic activity. This paper builds on previous studies to establish whether there is a short‐term predictive relationship between measures of consumer confidence and actual consumption, in a range of major industrial countries. It then extends such previous analyses by assessing whether this relation has changed over time, and whether we can attribute any time‐varying relation to structural developments in the economy, such as financial deepening and the increasing role of house prices in determination of consumption.