Predicting consumption of Italian households by means of survey indicators

The paper presents a small macroeconometric model for short-term forecasting of Italian households' consumption expenditure. In the search for leading indicators, the authors rely heavily on anticipation variables derived from a national household survey yielding some direct measures of consumers' expectations and subjective uncertainty. While the emphasis of the paper is on prediction, a theory-based approach is adopted in modelling the consumption equations, to the extent permitted by the data. Results appear quite satisfactory. The model outperforms in prediction the best purely time series model as well as a restricted model without the main attitudinal variables.