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  • Thumbnail for Consumer confidence as a leading indicator for gross domestic product growth
    Consumer confidence as a leading indicator for gross domestic product growth by Melito, Jacob P.

    The Conference Board’s Consumer Confidence Index consistently fluctuates with GDP growth. While many believe that this correlation is caused by consumer’s reactions to economic changes, this paper argues that economic changes are reacting to consumer’s attitudes in the form of GDP growth. By using both The Conference Board’s Consumer Confidence Index and The University of Michigan’s Index of Consumer Sentiment, this study is able to compare and distinguish which index has better forecasting capabilities. Granger-causality regressions on a 4 year time-series showed statistical evidence that The Consumer Confidence Index was capable of determining GDP growth one and two years in advance while GDP growth does not appear to influence consumer confidence. In accordance with previous research, The Index of Consumer Sentiment does not appear to possess any forecasting power for GDP growth.