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Federal Reserve Bank of Richmond
Working Paper
Learning About Consumer Uncertainty from Qualitative Surveys: As Uncertain As Ever
Santiago Pinto
Pierre-Daniel G. Sarte
Robert Sharp

We study diffusion indices constructed from qualitative surveys to provide real-time assessments of various aspects of economic activity. In particular, we highlight the role of diffusion indices as estimates of change in a quasi extensive margin, and characterize their distribution, focusing on the uncertainty implied by both sampling and the polarization of participants' responses. Because qualitative tendency surveys generally cover multiple questions around a topic, a key aspect of this uncertainty concerns the coincidence of responses, or the degree to which polarization comoves, across individual questions. We illustrate these results using micro data on individual responses underlying different composite indices published by the Michigan Survey of Consumers. We find a secular rise in consumer uncertainty starting around 2000, following a decade-long decline, and higher agreement among respondents in prior periods. Six years after the Great Recession, uncertainty arising from the polarization of responses in the Michigan Survey stands today at its highest level since 1978, coinciding with the weakest recovery in U.S. post-war history. The formulas we derive allow for simple computations of approximate confidence intervals, thus affording a more complete real-time assessment of economic conditions using qualitative surveys.

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Santiago Pinto & Pierre-Daniel G. Sarte & Robert Sharp, Learning About Consumer Uncertainty from Qualitative Surveys: As Uncertain As Ever, Federal Reserve Bank of Richmond, Working Paper 15-9, 03 Sep 2015.
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Keywords: Economic Uncertainty; Qualitative Data; Diffusion Index
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