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Forecasting private consumption: survey‐based indicators vs. Google trends

  • Simeon Vosen
  • Torsten Schmidt

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. Copyright (C) 2011 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 30 (2011)
Issue (Month): 6 (September)
Pages: 565-578

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Handle: RePEc:jof:jforec:v:30:y:2011:i:6:p:565-578
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  1. Nikolaos Askitas & Klaus F. Zimmermann, 2009. "Google Econometrics and Unemployment Forecasting," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 55(2), pages 107-120.
  2. Croushore, Dean, 2004. "Do Consumer Confidence Indexes Help Forecast Consumer Spending in Real Time?," Discussion Paper Series 1: Economic Studies 2004,27, Deutsche Bundesbank, Research Centre.
  3. Jason Bram & Sydney Ludvigson, 1997. "Does consumer confidence forecast household expenditure?: A sentiment index horse race," Research Paper 9708, Federal Reserve Bank of New York.
  4. Jeffrey C. Fuhrer, 1993. "What role does consumer sentiment play in the U.S. macroeconomy?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 32-44.
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