1. Joint EU-OECD Workshop on International Development of Business and Consumer tendency Surveys Use of Business and Consumer pinion Survey Data in the ECB
Ricardo Mestre
Brussels, November 2005

2. 1. Structure of Presentation
Actual use of surveys in the ECB
Type of surveys in use
Type of data used in the analysis
Type of analysis performed
Survey information that could be of help

3. 1. Actual Use of Surveys in the ECB
Conjuncture analysis:
Inflation indicators (e.g., long-term inflation expectations)
Cyclical indicators
Indicators for forecasts
Information is timely and exhaustive
Research analysis:
Rationality of expectations
Historical information consistent and long

4. 2. Type of Surveys Used in Analysis
European Commission: Consumer survey, Industry survey, Construction survey, Retail trade survey, Service sector survey
Survey of Professional Forecasters
Purchasing Managers
Economic Consensus Forecasts
Country-level surveys: NBB, Ifo, ZEW, INSEE, etc.

5. 3. Type of Data Used in Analysis
Confidence indicators
Consumer confidence
Other …
Balance of opinions
Quantified qualitative questions
In special, for inflation
Raw questions
Used for analysis based on factor-extraction techniques

6. 3.a Confidence Indicators
Industrial production and industrial confidence

7. 3.a Confidence Indicators
Private final consumption and consumer confidence

8. 3.a Confidence Indicators
Retail trade and retail trade confidence

9. 3.b Quantified Questions

10. 3.c Raw Questions

11. 3.c Raw Questions

12. 4. Type of Analysis Performed
Current analysis
Surveys directed to firms capture the cycle
Consumer survey
Long-term inflation expectations
Forecasts based on indicators
Surveys provide useful indicators for simple forecasts
Surveys add useful information to factor-based forecasts

13. 4. Type of Analysis Performed (II)
Forecasts are generated:
Via simple ‘bridge’ equations with a small number of indicators
Using large data sets (including survey information) to derive dynamic factors

14. 4. Bridge-Equation-Based Forecasts
Bridge equations:
Simple OLS univariate regressions
Indicators must be timely
Common indicators:
Surveys: EC Economic Sentiment
Others: Ind. Prod., OECD CLI, etc.

15. 4. Factor-Based Forecasts
Factors derived from large dataset:
n variables (xt) , r factors (Ft), q dynamic shocks (ut), n>>r>q
The methodology allows for end-of-sample missing data (early exploitation of timely data)

16. 4.b SPF Inflation Expectations

17. 4.c Indicator-Based Forecasts
Euro area GDP growth forecasts

18. 4.d Factor-Based Forecasts
Updates of the signal for 2004qQ2, from April 04 to July 04, GDP growth
Standard error of the common and idiosyncratic components

19. 4.d Factor-Based Forecasts
Updates of the std deviation of the nowcast for 2004qQ2, From April 04 to July 04, GDP growth

20. 5. Further Survey Data of Use
Better coverage of prices (e.g., retail trade and service sectors)
Broader sectoral coverage (e.g., services)
Ambiguity of some questions (e.g., price questions for consumers)
Time-consistency of data must be preserved!