Real sector confidence index and TEPAV Producer Survey: Wavelet co-movement of public and private data

This study aims to produce further thoughts regarding the ongoing debate of the usefulness of leading economic indicators from the nowcasting literature standpoint. Basically, it focuses on the effects and contributions of a leading economic indicator which is calculated and made public by a private corporation in the emerging market of Turkey. Turkish Economic and Political Research Foundation (TEPAV) collects information from producers in several different sectors of the Turkish economy through a survey that includes eight questions and an index value titled as the Retail Sector Confidence Index (TEPE) is derived for public use. The results are announced monthly and it is vital to test whether this index contains important information that is useful for both current and future economic stances from the producer perspective. The analysis of TEPE should help to understand if economic agents update their information sets and decide on their expectations of current and future consumption patterns and the general economic outlook considering TEPE a leading indicator. This study employs TEPE of TEPAV and compares it with similar survey data like Real Sector Confidence Index of the Central Bank of the Republic of Turkey (CBRT), the Capacity Utilization Index, the Industrial Production Index and the production part of the Survey of Expectations from the CBRT to check its validity. The data set is for January 2011 – February 2018. The methods employed are frequency-domain causality and wavelet co-movement analysis. Our results show that TEPE contains important information that can be extracted for now casting the paths of output and consumption.