Consumer confidence foreshadows developments in the economy

Abstract

Consumer confidence indicators are widely used in monitoring the economic cycle, as they are thought to contain forward-looking information on the path of the economy. Changes in consumer confidence have historically preceded shifts in the economic cycle by about six months. The value of forward-looking indicators is highlighted especially during exceptional inflection points in the economy, such as during the financial crisis or the currently prevailing coronavirus crisis, as these indicators provide readily available information about the future path of the economy. The rebound in consumer confidence and the recovery of the economy appear to be intimately connected.