Japan Live Economic Forecasts with Google Search Volume

Japan Live Economic Forecast of GDP Growth Rate, Unemployment Rate, and Inflation rate with the Google Domestic Trends Estimation.

Google Domestic Trends track Google traffic across specific sectors of the economy. Changes in the search volume of a given sector on google provide unique economic insight. 

The indexes measure relative query volume compared to the total number of searches on google.Thus, an index that is decreasing does not imply that the total number of searches is decreasing; in fact the number of queries could be increasing, just not as quickly as overall search volume.

Overview Actual Google Trend Estimation Q4/17 GTE Q1/18 GTE Q2/18 GTE 2020 GTE
GDP Growth Rate 1.00 0.7 0.5 0.3 0.2 0.5
Unemployment Rate 2.80 3.2 3.3 3.2 3.2 3.8
Inflation Rate 0.40 0.5 0.6 0.5 0.7 2
Interest Rate -0.10 -0.1 -0.1 -0.1 -0.1 0.1

GTE, Google Trend Estimation

Methodology for Predictions

Prediction models use a simple linear model:
Base prediction model for Retail: use last month's value and a year back (i.e. )—t refers to current month, t-1 is last month, t-12 is one year earlier.
The index was added as an additional independent variable to the respective base prediction model

Rolling 24-month regression (least squares fit) to get the weights of the terms in the equations using data from 2006-2007. Then using the weights computed predicted values for 2008 and then determine the mean absolute error.

The index value used for predicting was either the 30 day moving average of the index OR the Year-over-Year change in the 30 day moving average.

Take a look at how we estimate with google data:

Regression Analysis Guide

Estimation with Multi Variables

Can Google queries help predict economic activity?

Interesting Examples
From the graph below you will see that actual clothing store sales and the Google Retail index has been decreasing over time. There are seasonal spikes in clothing store sales, but over time there has been a pronounced decrease.

Google Auto Buyers Index
User searches related to car buying increased dramatically with the launch of the US Government's Cash for Clunkers program. We see that the Auto Buyers Index jumped to 1.4 at the end of July 2009.

Predicting retail sales
The US Census Bureau releases the Advance Monthly Retail Sales survey 1–2 weeks after the close of each month. These figures are based on a mail survey from a number of retail establishments and are thought to be useful leading indicators of macroeconomic performance. Learn more about the survey and the procedures followed in constructing these numbers.

The retail sales data is organized according to the NAICS retail trade categories. The data is reported in both seasonally adjusted and unadjusted form; for the analysis in this section, we use only the unadjusted data for the NAICS category 448 (clothing and clothing accessories stores).

Google Domestic Trends data

The Google RETAIL index tracks query volumes on Google.com related to the retail trade category. Sample queries are "retail, bags, retail sales". Thus, to predict retail sales of March, 2008 we use the index value on March 15th, 2008.

It is observed that the Mean Absolute Error improves from 6.52% to 3.65% (an improvement of 44%)!

We work across the world

From London to San Francisco, to our home base in (Saint Helier) Jersey, we’re looking for extraordinary and creative scientists to help us drive the field forward.

Disclaimers: AC Investment Inc. currently does not act as an equities executing broker or route orders containing equities securities. All data and information is provided “as is” for personal informational purposes only, and is not intended for trading purposes or advice. Please consult your broker or financial representative to verify pricing before executing any trade.

77 Massachusetts Avenue Cambridge, MA 02139 617-253-1000 pr@ademcetinkaya.com