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Consumer Attitudes and Their Forecasting Power for Consumer Spending

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The University of Michigan's Surveys of Consumers is summarized with principal components of consumer attitudes with respect to income and wealth, prices, and interest rates and credit availability. These summary… Click to show full abstract

The University of Michigan's Surveys of Consumers is summarized with principal components of consumer attitudes with respect to income and wealth, prices, and interest rates and credit availability. These summary measures contain information beyond that captured by the Index of Consumer Sentiment. The summary measures have forecasting power for aggregate consumption behavior, even when controlling for economic fundamentals. These measures also help to improve significantly upon Survey of Professional Forecasters, Blue Chip Consensus, and Federal Reserve Board's forecasts of consumption and other real activity measures, consistent with their predictive ability conditioned upon a broader set of fundamentals and forecasters’ judgment.

Keywords: consumer attitudes; forecasting power; power consumer; consumer; attitudes forecasting

Journal Title: Journal of Money, Credit and Banking
Year Published: 2017

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