Google trends trumps indicators: shock!

“Forecasting Private Consumption: Survey-Based Indicators vs. Google Trends”, SIMEON VOSEN* AND TORSTEN SCHMIDT, RWI, Essen, Germany

ABSTRACT

In this study we introduce a new indicator for private consumption based on search query time series provided by Google Trends. The indicator is based on factors extracted from consumption-related search categories of the Google Trends application Insights for Search. The forecasting performance of the new indicator is assessed relative to the two most common survey-based indicators: the University of Michigan Consumer Sentiment Index and the Conference Board Consumer Con?dence Index. The results show that in almost all conducted in-sample and out-of-sample forecasting experiments the Google indicator outperforms the survey-based indicators. This suggests that incorporating information from Google Trends may offer signi?cant bene?ts to forecasters of private consumption.

Journal of Forecasting, 30, 565–578 (2011)

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paul frijters
paul frijters
10 years ago

this stuff is going to be big: google trends is so easy to pump for data and so up-to-date that it is quickly going to be mined for leading indicators of almost anything (health, happiness, employment, election outcomes, housing prices). Its a race as to whom can most quickly establish what search terms correspond to what indicator of interest. There’s a fortune to be made with this. Its a pity I dont need the money and that I am lazy about these things. Maybe something for lateral economics?

Tel
Tel
10 years ago

I’d have thought that people who can afford to buy would go and buy, but people who can’t afford to buy will spend all day looking.

I suggest the index might say more about consumer desires than anything else.