Does consumer sentiment accurately forecast UK household consumption? Are there any comparisons to be made with the US?

Psychology, Consumer Sentiment and Household Expenditures: A Disaggregated Analysis

“…As for the R 2 of the regressions, it varies between 0.03 (for services) and 0.153 (for total consumption), being generally higher for the aggregate estimates than for those performed on more detailed measures of consumers expenditures. These results are in contrast with those provided in Easaw et al (2003) for the UK, in which the highest explanatory power of income was found in the durable goods equation. Estimation of equation (2) provides evidence of an autonomous role of Italian consumer sentiment in anticipating consumption patterns, even when innovation in income is included in the regression.…”

“…1): in equation (1), λ appears to be significant at the 95% confidence level for all categories of expenditures but for non durables goods. However, the value of λ for total consumption is equal to 0.26, quite low with respect to what has been found by Caroll et al (1994) and Easaw et al (2003) for US and UK respectively, providing first evidence of a lower role of "rule of thumbers" in the Italian economy 11 . However, its value increases with durability, as expected on 9 Carroll et al (1994) mentioned the possibility of Consumer Index (CI) being I(1) but stated that the results including first-differenced CI were quite similar to the ones reported in their paper.…”

“…The value of the parameter slightly increases when the list of instruments includes three lags each of the dependent variable, the growth of real labour income, the change in the unemployment rate, the change in the 3-month Treasury bill rate and the percentage change in the S&P 500 stock price index. More recently, Easaw et al (2003) (1) and (2). The values of the Β, λ and θ parameters are also included, together with the p-values for the t-statistic and the Wald test on the joint significance of ΣΒ and λ. Hypothesis testing was conducted using a WhiteHeteroskedasticity consistent covariance matrix.…”

Sentiment, mood and outbound tourism demand

“…As a result, expectations of future income and wealth are regarded as important factors that affect consumers' behavior on whether or not to spend on luxury goods and services. In fact, a number of studies have found that consumer sentiment indexes have forecasting power on consumer spending patterns (Carroll et al, 1994;Ludvigson, 2004;Easaw, Garratt, & Heravi, 2005).…”

Forecasting Private Consumption by Consumer Surveys

“…In fact, its impact on consumption almost vanishes, if the forecasting equation is extended by macroeconomic fundamentals known at the time of the forecast. Carroll, Fuhrer and Wilcox (1994) and Bram and Ludvigson (1998) have provided evidence that lagged values of the CCI can improve short-term forecasts for consumption spending in the US to a minor extent, while Acemoglu and Scott (1994) and Easaw, Garratt, and Heravi (2005) have reported similar results for the UK. Ludvigson (2004) has argued that much of the survey information is already included in other economic and financial indicators, such as labour income growth, real share prices, and short-term interest rates.…”