Does Consumer Confidence Forecast Household Saving and Borrowing Behavior? Evidence for Poland

Abstract

Consumer confidence plays an important role in households’ decision-making processes. This study investigates the effects of consumer confidence on household saving and borrowing behavior that are unsatisfactorily considered in previous discussions. The questions of interest are first, whether indexes of consumer confidence have any predictive power on their own for future household saving and borrowing rates, and second, whether they contain information about future household saving and borrowing rates aside from the information contained in other available indicators. In addition to aggregate confidence indicators, their components are used to provide more precise information. Overall, the multiple linear regression analysis (OLS technique) of Polish time-series data gives positive answers to both questions. This finding supports the recommendation of combining the strengths of objective indicators (such as economic fundamentals) and subjective indicators (such as consumer confidence) to improve household financial behavior forecasts.

Empirical modelling of survey-based expectations for the design of economic indicators in five European regions

“…These results are in line with those obtained by Łyziak and Mackiewicz-Łyziak (2014) In the present study we also find evidence regarding the informative value of surveybased expectations. Our results are in line with recent findings by Altug and Çakmakli (2016), Klein and Özmucur (2010), Kłopocka (2017) and Lehmann and Wohlrabe (2017). Altug and Çakmakli (2016) found survey expectations useful to improve inflation forecasts.…”

“…Klein and Özmucur (2010) found evidence that survey expectations improved the forecasting performance of autoregressive time series models in European countries. Kłopocka (2017) showed the usefulness of survey indicators to forecast household saving and borrowing rates in Poland. Lehmann and Wohlrabe (2017) found that consumers' unemployment expectations and new orders improved predictions of employment growth in Germany.…”

Personal Finances vs. the Overall Economic Conditions: What Drives the New EU Member States’ Stock Markets?

“…The strong link between consumer confidence and savings are already recognized by some studies (e.g. Kłopocka 2016), so this finding is hardly a surprise.…”

Building consumer confidence index based on social media big data

“…CCI, also known as Index of Consumer Sentiment, is used to reflect the consumers' psychological feelings and confidence about economic situation and consumption at the moment or in a certain period of time (Islam & Mumtaz, ; Kłopocka, ), including consumer's views on various economic situations such as interest rate, employment, and price status. CCI includes the Index of Current Economics Condition (ICC) and Index of Consumer Expectations (ICE) (National Bureau of Statistics, ).…”

“…Research on consumer psychology showed that consumers' subjective confidence of economic condition would directly predict and influence macroeconomic condition, along with the concept of Consumer Confidence Index (CCI) emerging (Gholipour Fereidouni & Tajaddini, 2017;Li, Chang, & Chen, 2008;Sori c, 2018). CCI, also known as Index of Consumer Sentiment, is used to reflect the consumers' psychological feelings and confidence about economic situation and consumption at the moment or in a certain period of time (Islam & Mumtaz, 2016;Kłopocka, 2017) ICE represents the level of consumers' expectation of the economic condition and consumption over a period in the future, which reflects the confidence of future economic development.…”