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Enhancing GDP nowcasts with ChatGPT: a novel application of PMI news releases

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  • Sun, Yiqiao
  • de Bondt, Gabe

Abstract

This study involves tasking ChatGPT with classifying an “activity sentiment score” based on PMI news releases. It explores the predictive power of this score for euro area GDP nowcasting. We find that the PMI text scores enhance GDP nowcasts beyond what is embedded in ECB/Eurosystem Staff projections and Eurostat’s first GDP estimate. The ChatGPT-derived activity score retains its significance in regressions that also include the composite output PMI diffusion index. GDP nowcasts are significantly enhanced with PMI text scores even when accounting for methodological variations, excluding extraordinary economic events like the pandemic, and for different GDP growth quantiles. However, the forecast gains from the enhancement of GDP nowcasts with ChatGPT scores are time dependent, varying by calendar years. Sizeable forecast gains of on average about 20% were obtained apart from the two most recent years due to exceptionally low forecast errors of the two benchmarks, especially the first GDP estimate. JEL Classification: C8, E32, C22

Suggested Citation

  • Sun, Yiqiao & de Bondt, Gabe, 2025. "Enhancing GDP nowcasts with ChatGPT: a novel application of PMI news releases," Working Paper Series 3063, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253063
    Note: 2759141
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    References listed on IDEAS

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    Cited by:

    1. Byeungchun Kwon & Taejin Park & Phurichai Rungcharoenkitkul & Frank Smets, 2025. "Parsing the pulse: decomposing macroeconomic sentiment with LLMs," BIS Working Papers 1294, Bank for International Settlements.

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    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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