The terrorist attacks on September 11 infected the U.S. economy very badly. Most of its consequences are still to emerge at its full potential. Those attacks paralyzed the life in United States. Every sector got affected from those attacks.
After those terrorist attacks, many economists, politicians, and businessmen also worried about the possible harm to business and consumer Confidence. The effects on business and consumer confidence are hard to measure and nothing can be concluded or predicted for future. But the regular surveys and research of households make it lot easier to assess and analyze the effects on consumer confidence and their rational behavior. It was also a big marketing concern too faced with this unwanted hassle forecasters and policymakers struggled to interpret the movements in consumer confidence and their ever changing behavior.
Analysts paid increased attention to the two major measures of consumer Confidence after September 11. Two indices were also used i.e. Consumer Confidence Index and Index of Consumer Sentiment.
These two major confidence indexes are broadly similar in design but differ in many details. They mainly focus on five main questions about prevailing and probable conditions. They also differ in how the questions have put and the time periods for which households provide their expectations and concerns. As consumer confidence and their behavior is a natural and most often a real indicator for analysts and policymakers to monitor in times of commotion. With consumer spending equal to roughly two-thirds of real GDP, confidence-related shifts in consumption could overshadow the more direct economic losses from September 11. Fluctuations in consumer confidence really help to predict economic variables of interest, such as real GDP or consumption.
Importantly the projecting accuracy of the different models was compared using the root mean squared errors of their forecasts from the first quarter....
