Abstract
The deterioration of Consumer Confidence has been considered an important driver of the recent financial crisis. However, empirical evidence on the relationship between confidence and household consumption is often inconclusive; in many cases, available analysis does not seem to confirm that confidence is able to predict expenditures once the role of economic fundamentals has been accounted for. Nevertheless, generally speaking, most of the literature refers to the most advanced economies of Europe and the USA, while evidence for emerging economies remains scarce. The main aim of this paper is to fill this gap for Brazil, looking at Consumer Survey data published by the Fundação Getulio Vargas since 2005, and studying its relationship with Brazilian consumption expenditures. According to the results, the overall Consumer Confidence Index and the Present Situation Index are good predictors of consumption, helping to improve the goodness of fit of consumer spending forecasting models. We also show that in Brazil a positive shock to confidence has a positive and significant impact on consumption for at least three quarters, a finding similar to those for more industrialized countries.
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Source: FGV/IBRE for the confidence indicator; IBGE for consumption expenditures
Source: FGV/IBRE
Source: FGV/IBRE
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Notes
Early investigations include those of Fair (1971), who links the University of Michigan index with both durable and nondurable consumer expenditures, and Mishkin (1978), who argues that the Michigan index may be a good proxy for the consumer’s subjective assessment on the probability of future financial distress. More recent studies analyzing the relationship between confidence and consumption are those of Carroll and Dunn (1997), Carroll et al. (1994), Fuhrer (1993), Leeper (1992), Matsusaka and Sbordone (1995), and Golinelli and Parigi (2004).
The web-based responses were compared to those obtained with telephone questionnaires, finding no significant differences. The share of web-based questionnaires is however always below 5% of the total.
Data for Europe and the US are available upon request.
Constant-price values measured as of February 2016 [deflated by the Extended National Consumers Price Index (IPCA) calculated by the Brazilian Institute of Geography and Statistics (Institute Brasileiro de Geografia e Estatistica—IBGE)]. https://www.ibge.gov.br/en/statistics/economic/prices-and-costs/17129-extended-national-consumer-price-index.html?=&t=o-que-e
As established by the Brazilian Business Cycle Dating Committee, see https://portalibre.fgv.br/estudos-e-pesquisas/codace/.
If we consider the whole sample (1996–2015), we do accept the homoscedasticity hypothesis.
For the role of commodities prices for Latin American economies, see Gallagher and Porzecanski 2010.
According to the Brazilian Dating Committee the recession started in 2014.Q2 and ended in 2016.Q4. During these 11 quarters, seasonally adjusted GDP fell by 8.6%, one of the worst recessions in the history of Brazil.
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Campelo, A., Bittencourt, V.S. & Malgarini, M. Consumers Confidence and Households Consumption in Brazil: Evidence from the FGV Survey. J Bus Cycle Res 16, 19–34 (2020). https://doi.org/10.1007/s41549-020-00042-2
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DOI: https://doi.org/10.1007/s41549-020-00042-2