Learning About Consumer Uncertainty from Qualitative Surveys: As Uncertain As Ever

Santiago Pinto (), Pierre Daniel Sarte and Robert Sharp

No 15-9, Working Paper from Federal Reserve Bank of Richmond

Abstract: We study diffusion indices constructed from qualitative surveys to provide real-time assessments of various aspects of economic activity. In particular, we highlight the role of diffusion indices as estimates of change in a quasi extensive margin, and characterize their distribution, focusing on the uncertainty implied by both sampling and the polarization of participants' responses. Because qualitative tendency surveys generally cover multiple questions around a topic, a key aspect of this uncertainty concerns the coincidence of responses, or the degree to which polarization comoves, across individual questions. We illustrate these results using micro data on individual responses underlying different composite indices published by the Michigan Survey of Consumers. We find a secular rise in consumer uncertainty starting around 2000, following a decade-long decline, and higher agreement among respondents in prior periods. Six years after the Great Recession, uncertainty arising from the polarization of responses in the Michigan Survey stands today at its highest level since 1978, coinciding with the weakest recovery in U.S. post-war history. The formulas we derive allow for simple computations of approximate confidence intervals, thus affording a more complete real-time assessment of economic conditions using qualitative surveys.

Keywords: Economic Uncertainty; Qualitative Data; Diffusion Index (search for similar items in EconPapers)
JEL-codes: C18 C46 C83 D80 E32 E66 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-09-03
New Economics Papers: this item is included in nep-his and nep-mac
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Citations: View citations in EconPapers (4)

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