Several new types of high-frequency indicators have emerged in recent years. And the pandemic has only accelerated the push to explore their viability. A new OECD paper finds Google Trends data can accurately track weekly GDP growth. Using a machine learning algorithm (neural network), the author finds:
The Google Trends model is better at forecasting output changes than an (autoregressive) model that just uses lags of YoY GDP growth.
It captures a sizeable share of business cycle variations, including around the Global Financial Crisis and the euro area sovereign debt crisis.
The Weekly Tracker captures on average 60% of the fall observed in Q2 2020 (Chart 1). Topics related to consumption items and economic anxiety are the main drivers of the fall.
The tracker closely correlates with weekly movements in mobility. The Google Mobility Index has already been shown to track activity well.
TO READ THIS DEEP DIVE
SUBSCRIBE TO MACRO HIVE PRIME