5. A Dual-Source Indicator of Consumer Confidence

Abstract

The objective of this paper is to improve the U.S. leading confidence indicator by combining its amended version with the Conference Board's equally well known Consumer Expectation Index. The resulting dual-source indicator provides a factorial structure in which survey items are nested. The results presented here show that this structure is not well fit by a generalized linear model. Hence a nonlinear model is invoked which provides differential logistic slopes for the survey items. This latter model is based on the work of McCullagh (1980). The effects estimated in this nonlinear structure provide the United States with a potential leading indicator that is richer and more informative than its current Index of Consumer Expectations. The suggested indicator prevents the mixed signals and inconsistencies that can occur when separately reporting results from our two most prominent sources of consumer perception.