Personal Consumption Expenditures: August 2013 Preview

Personal consumption spending for August is projected to rise 0.3% vs. the previous month in tomorrow’s update, based on The Capital Spectator’s average econometric forecast. In a rare case of unity, all five models are predicting a 0.3% gain (see table below). Today’s average projection represents an improvement over the previously reported 0.1% increase for July. Meanwhile, the Capital Spectator’s average 0.3% forecast for August is at the upper range of several consensus predictions based on surveys of economists.


Here’s a closer look at the numbers, followed by brief summaries of the methodologies behind The Capital Spectator’s estimates:
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VAR-1: A vector autoregression model that analyzes the history of personal income in context with personal consumption expenditures. The forecasts are run in R with the “vars” package.
VAR-3: A vector autoregression model that analyzes three economic time series in context with personal consumption expenditures. The three additional series: US private payrolls, personal income, and industrial production. The forecasts are run in R with the “vars” package.
ARIMA: An autoregressive integrated moving average model that analyzes the historical record of personal consumption expenditures in R via the “forecast” package to project future values.
ES: An exponential smoothing model that analyzes the historical record of personal consumption expenditures in R via the “forecast” package to project future values.
R-1: A linear regression model that analyzes the historical record of personal consumption expenditures in context with retail sales. The historical relationship between the variables is applied to the more recently updated retail sales data to project personal consumption expenditures. The computations are run in R.

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