ON THE VALIDITY OF CONSUMER SENTIMENT IN SMALL-AREA ECONOMIC FORECASTING

A.E. Rodriguez & Carolyne C. Soper
May 2019

Connecticut Sentiment Index, in Levels

Connecticut Sentiment Index, Month-to-Month Change

Does a tailored sentiment index improve small area predictions?

  • What region or area
  • Machine Learning Algorithms: Random Forests, Neural Nets
  • ARIMAX
  • Sentiment Index or other tailored index

Business Scorecard

Predictors

Sentiment Index: Conference Board CCI for New England

Connecticut Unemployment Rate

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Confidence Index and Unemployment Rate (Inverse)

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ML Model Performance: Out-of-Sample Prediction

ML Model Performance: Out-of-Sample Predictions

ML Model Performance: Step-Ahead Prediction