Animal spirits and household spending in Europe and the US

We investigate whether consumer confidence has an independent effect on household spending. First, we determine a common set of factors that drive both consumer confidence and household spending. Next, we interpret the non-systematic residuals in the country consumer confidence equations as a proxy for animal spirits and include this proxy in the spending equations as an additional explanatory variable. Our results suggest that animal spirits exist and may have a considerable impact on spending growth in Europe and the US.