Business and consumer surveys:
a user perspective
Joint EC - OECD Workshop
Brussels
15 November 2005
Benoît Robert
Research Department
National Bank of Belgium
Use of survey indicators at the NBB
 mainly Belgian indicators (surveys conducted by the NBB),
also EC-OECD indicators
 every-day use for short-term analysis
 contemporaneous assessment: activity, demand, turning points
 ex-post explanation: specific questions, case studies
 forecast: indicators included in short-term models
p.m. not in the quarterly model of the Bank
Business confidence in Belgium: overall synthetic
curve (seasonally adjusted data)
10
Identification of turning points
(removing irregular components)
5
0
-5
-10
Latest
developments
-15
-20
-25
-30
1980
1982
1984
1986
1988
Smoothed series
Source: NBB.
1990
1992
1994
1996
1998
p.m. average 1980-2004
2000
2002
2004
Gross series
Smoothing of Belgian business confidence
0
-2
Oct
-4
Moving average
-6
of median values
Jul-Aug
-8
-10
Jun
-12
-14
2004
2005
Smoothed series
Source: NBB.
Lower forecast
Upper forecast
Gross series
Major properties of survey indicators for economic
analysis
 correlated with activity and demand aggregates, employment,
inflation
 rapidly and regularly available
 no revision
 specific type of information: qualitative, expectations,
explanatory factors
Trade-off: low volatility ↔ timeliness
Overall business confidence and GDP
6
15
5
10
4
5
3
0
2
-5
1
-10
0
-15
-1
-20
-2
-25
1996
1997
1998
1999
2000
GDP (y-o-y growth, left-hand scale)
Sources: NAI, NBB.
2001
2002
2003
Smoothed series
2004
2005
Gross series
Consumer confidence and private consumption
5
20
4
15
10
3
5
2
0
Oil
1
-5
-10
0
-15
-1
9/11
Iraq
Lay-offs
-20
-2
-25
1996
1997
1998
1999
2000
2001
Private consumption (y-o-y growth, left-hand scale)
Sources: NAI, NBB.
2002
2003
2004
2005
Consumer confidence
Uses of components of the overall indicators
 questions for industry
 assessment of total order book: contemporaneous for demand
 demand forecast : leading for demand
 employment forecast and quarterly shortages of skilled labour
(DCU): leading for employment
 selling price expectations (EC consumer): inflation forecast
 case studies (shocks): perceived inflation following introduction
of euro, impact of lay-offs on consumer confidence, explanation
for weak business investment (DCU)
GDP forecast: Survey indicators used in two
models with different characteristics
Bridge models
Generalized dynamic factor model
Individual simple equations
Extensive and integrated model
Limited number of variables
Very large number of variables
"Arbitrary" chosen
Bridge models
Monthly indicators → quarterly NA aggregates.
Two steps:
1. quarterly equation: ∆ GDP =
f (∆ hard data, ∆ soft data)
VAT, industrial
production
business surveys
additional information of surveys: limited but significant
2. monthly ARIMA-equations to forecast missing months of indicators:
surveys = more readily available → fewer months to forecast
Release calendar: October 2005
Industrial production August (13 Oct)
6
GDP flash Q3-2005 (26 Oct)
3
3.0
0
2.5
-3
2.0
Y-o-y
Q-o-q
Overall business confidence October (25 Oct)
1.5
1.0
0
0.5
-3
-6
-15
Y-o-y
Smoothed
Gross
Q-o-q
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Mar-04
-12
Jun-04
0.0
-9
Generalized dynamic factor models (GDFM)
Search for common component (CC) in a very large number of series
business cycle
e.g. business and
consumer surveys
CC
idiosyncratic
Generalized dynamic factor models: Uses
 cyclical properties of indicators:
 degree of commonality: how large is the business cycle component?
 lead or lag with respect to CC of GDP (= reference)?
 forecast of GDP: use of CC of indicators
Generalized dynamic factor models: Data set
509 indicators for the Belgian economy
Non-Survey
Survey
185
Activity
55
Labour market
32
Prices
47
Financial
51
-Interest rates
22
-Asset prices
29
Business
confidence
Consumer
confidence
324
-Overall
-Manufacturing
-Trade
-Building
-Capacity
-Belgium
-Non-Belgium
-NBB
-IFO
-ISM
-INSEE
-CBS
-BOJ
-OECD
-Belgium
-Non-Belgium
-NBB
-EC
247
77
GDFM results: Cyclical behaviour (1)
Coincident
Leading
Lagging
Total
51%
22%
27%
Non-survey
38%
25%
37%
0%
97%
3%
Survey
59%
20%
21%
Business confidence
66%
24%
10%
Consumer confidence
35%
9%
56%

Asset prices
GDFM results: Cyclical behaviour (2)
 Most leading surveys:
 ISM indicators
 OECD indicators (US, UK, Japan)
 IFO building sector
 NBB building sector
 Most lagging surveys:
 EC consumer confidence indicators
 Individual results
 Important to assess the value of an indicator
Conclusion: needs of the surveys user
General need (analysis-forecast):
deliverance of an unambiguous message
this means
 timely and non-revised data
but also
 release of only one (best) serie which is the common reference
for all users, including general public
 danger of double publication based on same underlying data