The European Commission (EC) measures consumer and business confidence throughout the European Union (EU) through periodic Business and Consumer Surveys. Find the non-seasonally adjusted data for consumer confidence in EU member states on the Commission’s Web site (http://ec.europa.eu/). The EC also compiles macroeconomic data accessible through the AMECO database. Find the values of final consumption expenditure at current prices.
a. Compute the average value of the consumer confidence index for the EU as a whole. Calculate the annual change in consumer confidence since 1985. What do you see?
b. Calculate the correlation between the level of consumer confidence and consumption growth at EU level since 1995. What do you observe?
c. Compare the two time series. Do you observe any correlation? In other words, does the EU data show a strong relationship between consumer confidence and actual consumption over time?