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- Title
How Should We Measure Consumer Confidence?
- Authors
Dominitz, Jeff; Manski, Charles F.
- Abstract
This article considers how best to measure consumer confidence. In particular, it analyzes the responses to eight expectation questions, each with a 12-month horizon, that have appeared in the Michigan Survey of Consumers in the period June 2002 through May 2003. Almost 50 years ago, one of the principal investigators of the Index of Consumer Sentiment called for careful reconsideration of the index in the concluding paragraph of her article. The index of consumer attitudes which is related here to individual purchases is still in an experimental stage. Ahead is the challenging problem of seeing whether closer correlations with purchases can be established by improving the index--by adding new series, revising the weighting of components, and refining the attitudinal measures themselves. Yet except for eliminating a question on price expectations, the questions in the index and how they are aggregated have been essentially unchanged. The findings reported in this article suggest that improvement is feasible along three main dimensions. First, the authors do not see an obvious rationale for asking consumers about such distant, ambiguous phenomena as business conditions. The respondents are not expert economic forecasters, as in the Livingston panel and the Survey of Professional Forecasters. If the objective is to use expectations data to predict personal consumption, expectations for business conditions should be relevant only to the extent that they are an input into formation of personal expectations.
- Subjects
BUSINESS conditions; CONSUMER behavior; CONSUMER attitudes; CONSUMER confidence; COMMERCE; ECONOMICS
- Publication
Journal of Economic Perspectives, 2004, Vol 18, Issue 2, p51
- ISSN
0895-3309
- Publication type
Article
- DOI
10.1257/0895330041371303