Ruhr Economic Papers

RWI, 10/2010, 28 S./p., 8 Euro, ISBN 978-3-86788-239-2

Abstract

In this study we introduce a new monthly indicator for private consumption in Germany
based on search query time series provided by Google Trends. The indicator is based
on unobserved factors extracted from a set of consumption-related search categories
of the Google Trends application Insights for Search. The predictive performance of the
indicator is assessed in real time relative to the European Commission’s consumer confidence
indicator and the European Commission’s retail trade confidence indicator. In
out-of-sample nowcasting experiments the Google indicator outperformed the surveybased
indicators. In comparison to the other indicators, the new indicator also provided
substantial predictive information on consumption beyond that already captured in
other macroeconomic variables.