Forecasting Private Consumption: Survey-Based Indicators vs. Google Trends

23 Pages Posted: 30 Nov 2009  

Torsten Schmidt

Rhine-Westphalia Institute for Economic Research (RWI)

Simeon Vosen

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Date Written: November 2009

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 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

Suggested Citation

Schmidt, Torsten and Vosen, Simeon, Forecasting Private Consumption: Survey-Based Indicators vs. Google Trends (November 2009). Ruhr Economic Paper No. 155. Available at SSRN: https://ssrn.com/abstract=1514369 or http://dx.doi.org/10.2139/ssrn.1514369

Torsten Schmidt

Rhine-Westphalia Institute for Economic Research (RWI) ( email )

45128 Essen
Germany

Simeon Vosen (Contact Author)

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
0049 201 8149 263 (Phone)
0049 201 8149 300 (Fax)

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