A new approach to improve the consumption prediction performance of the European Commission consumer confidence index

In European Union member and candidate countries, the consumer confidence index is implemented under the leadership of the European Commission and its results are closely followed by central banks, public policy makers, the private sector and households. The factor that makes the index, which is followed with such interest, valuable is that the consumption expenditures, which have a significant share in the economic size of the countries, can be predicted relatively earlier. In this study, it is aimed to develop the current consumer confidence index, which can predict consumption with a higher performance than the current consumer confidence index, by using the sub-indices of the consumer tendency survey conducted by the European Commission. In this study; Correlation analysis is performed for the 2010:1 – 2020:4 periods of 31 economies, including the European Union, the Eurozone and 29 countries. This study was inspired by the fact that the new sub-index, calculated by taking the difference of the values of the two sub-indices of the two questions in the consumer tendency survey applied by the European Commission, contains different and complementary information in terms of predicting consumption. According to the findings, it was concluded that the consumption prediction performance of the improved consumer confidence index, which was formed by the combination of the new sub-index and the existing consumer confidence index, is higher than the current consumer confidence index.