Mixed frequency composite indicators for measuring public sentiment in the EU

Monitoring the state of the economy in a short time is a crucial aspect for designing appro priate and timely policy responses in the presence of shocks and crises. Short-term con fdence indicators can help policymakers in evaluating both the efect of policies and the economic activity condition. The indicator commonly used in the EU to evaluate the pub lic opinion orientation is the Economic Sentiment Indicator (ESI). Nevertheless, the ESI shows some drawbacks, particularly in the adopted weighting scheme that is static and not country-specifc. This paper proposes an approach to construct novel composite confdence indicators, focusing on both the weights and the information set to use. We evaluate these indicators by studying their response to the policies introduced to contain the COVID-19 pandemic in some selected EU countries. Furthermore, we carry out an experimental study where the proposed indicators are used to forecast economic activity.