Using Debit Card Payments Data for Nowcasting Dutch Household Consumption

In this paper we analyse whether the use of debit card payments data improves the accuracy of one-quarter ahead forecasts and nowcasts (current-quarter forecasts) of Dutch private household consumption. Since debit card payments data are timely available, they may be a valuable indicator of economic activity. We study a variety of models with payments data and find that a combination of models provides the most accurate nowcast. The best combined model reduces the root mean squared prediction error (RMSPE) by 18% relative to the macroeconomic policy model (DELFI) that is used by the Dutch central bank (DNB). Based on these results for the Netherlands, we conclude that debit card payments data are useful in modelling household consumption