Copper Price Behaviour and the London Metal Exchange

This paper examines how variables which describe the expectations of consumers can contribute to the explanation of observed expenditure patterns and how measured series of such expectations can be used in a forecasting model to improve the prediction of short-term consumer expenditures. The expectations data are based on the British Market Research Bureau's Financial Expectations Survey and the respective series that are derived are tested in correlation and regression exercises against quarterly aggregate consumer expenditure series. The exercise finds that the information contained in these financial expectations has significant value for predicting expenditures in the period 1 to 12 months ahead. The forecasting models based on the expectational data generally perform as well as those based on conventional economic variables and the leading indicator properties of the expectations, combined with their rapid availability, enhance their value as a potential source of forecasting information.