Consumer sentiment: its causes and effects

Abstract

This paper finds that consumer attitudes, as reflected in surveys of consumer sentiment, have a significant influence on household purchases of durable goods. Normally, consumer sentiment moves with current economic conditions and bears a stable relationship to a few economic variables. At times of a major economic or political event like the Gulf War, however, consumer sentiment can move independently from current economic conditions. At such times it provides useful information about future consumer expenditures that is not otherwise available.