Forecasting imports with information from abroad

Globalization has led to huge increases in import volumes. Since imports fluctuate heavily over time, they are difficult to forecast and reliable leading indicators are needed. Our paper introduces the first leading indicator to forecast import growth, the Import Climate. While surveys are an often-used source for leading indicators, these data typically do not include information about expected import demand of firms and households. Therefore, our approach builds on the idea that import demand of the domestic country should be reflected in the expected export developments of its main trading partners, which can be measured by standard surveys. We show for six advanced economies that the Import Climate outperforms standard business cycle indicators that mainly reflect domestic demand. Thus, the Import Climate is a reliable tool for import forecasting for both academics and policymakers.