Forecasting Private Consumption: Survey-Based Indicators vs. Google Trends
23 Pages Posted: 30 Nov 2009
Date Written: November 2009
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 Confidence 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 significant benefits to forecasters of private consumption.
Keywords: Google Trends, private consumption, forecasting, Consumer Sentiment Indicator
JEL Classification: C53, E21, E27
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