On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates

Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Boston
Working Papers
The forecasting power of consumer attitudes for consumer spending
Michelle L. Barnes
Giovanni P. Olivei
Abstract

The widely studied Reuters/Michigan Index of Consumer Sentiment is constructed from the answers to five questions from the more comprehensive Reuters/Michigan Surveys of Consumers. Yet little work has been done on what predictive power the information taken from this more thorough compilation of consumer attitudes and expectations may have for forecasting consumption expenditures. The authors construct a limited set of real-time summary measures for 42 questions selected from these broader Surveys corresponding to three broad economic determinants of consumption—income and wealth, prices, and interest rates, and then use regression analysis to evaluate and test the ability of these summary measures to predict future changes in real consumer expenditures, even when controlling for current and future fundamentals. They explain a nontrivial portion of consumption and other real activity forecast errors from professional forecasts. This is consistent with these measures' ability to predict consumption even when conditioning on a broader set of fundamentals as well as professional forecasters' judgmental forecast adjustments.


Download Full text
Cite this item
Michelle L. Barnes & Giovanni P. Olivei, The forecasting power of consumer attitudes for consumer spending, Federal Reserve Bank of Boston, Working Papers 14-10, 30 Oct 2014.
More from this series
JEL Classification:
Subject headings:
For corrections, contact Catherine Spozio ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal