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 978-3-86788-175-3download
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
Schmidt, T. and S. Vosen (2011), Forecasting Private Consumption: Survey-based Indicators vs. Google Trends. Journal of Forecasting 30 (6): 565-578.