Ibrahim, Adamu Bawa, Sani Abdullahi, Ismaila S. Didigu, Chizoba E. Mainasara, Sani S.
Year of Publication:
[Journal:] CBN Journal of Applied Statistics [ISSN:] 2476-8472 [Publisher:] The Central Bank of Nigeria [Place:] Abuja [Volume:] 6 [Year:] 2015 [Issue:] 1 [Pages:] 285-300
Consumer confidence indicators(CCI) serve as a veritable tool for providing useful information to policy makers, forecasters and the general public. Recent studies indicated the possibility of a slowdown in output, resulting from the pessimism of consumers in their expectations about the general state of the economy, even if their pessimism were not based on economic fundamentals. This study evaluated the predictive ability of the CCI in forecasting economic fluctuations in Nigeria. The study applied the Granger Causality tests, impulse response functions and forecast error variance decomposition to assess if CCI granger causes output growth as well as ascertain the magnitude of the change in GDP resulting from a change in CCI. Results from granger causality tests indicated a causal relationship between CCI indicators and real GDP growth in Nigeria. Furthermore, the study found that CCI explained the movements in economic activities, even though the magnitude was small. These results have important implications for the usefulness of CCI in planning and forecasting macroeconomic aggregates.