Ruhr Economic Papers

Ruhr Economic Papers #155

Forecasting Private Consumption – Survey-based Indicators vs. Google Trends

by Torsten Schmidt and Simeon Vosen

RWI, 11/2009, 21 S./p., 8 Euro, ISBN 978-3-86788-175-3

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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.

JEL-Classification: C53, E21, E27

Keywords: Google Trends; private consumption, forecasting; Consumer Sentiment Indicato

Published as:

Schmidt, T. and S. Vosen (2011), Forecasting Private Consumption: Survey-based Indicators vs. Google Trends. Journal of Forecasting 30 (6): 565-578.

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