Heading Towards the New Great Recession? A Confidence Research Perspective

Abstract

This paper’s objective is to further stimulate economists’ motivation to carefully consider a class of economic sentiment indices which measure people’s beliefs, perceptions and expectations regarding the economy. As the acknowledged leading indicators of economic activity, they have the potential to timely point to the upcoming economic distress. However, given their potential, they are still relatively underused. The from-scratch empirical analysis in this paper detects the recent unfavourable developments in the key sentiment indices, particularly the ones measuring the confidence of consumers. Considering consumer sentiment indicators, the situation in the US and the European countries now seems even worse than during the Great Recession while the perceived uncertainty is building up. As the origin of the new crisis might lie in the sector of consumers – the drivers of final aggregate consumption – policymakers should take their sudden confidence drop seriously and accordingly develop near-future strategies to timely overturn these adverse trends.

Keywords

• business and consumer survey
• economic sentiment
• consumer confidence indicator
• recession