Forecasting Private Consumption with Google Trends Data, a paper co-authored by Henry Platt Bristol Professor of Economics Ann Owen and alumnus Jaemin Woo ’17, appeared in the Journal of Forecasting in October. This paper is joint work that grew out of Woo’s senior honors thesis in economics supervised by Owen.
Their research provides insight into the ways in which Google search data can improve forecasts of private consumption in the United States. They examined two types of Google searches: consumption-related searches for specific purchases consumers will make and news-related searches that are related to the state of the economy and broader consumer sentiment.
Their results suggest that Google search data provides additional information over and above traditional survey-based measures of consumer sentiment indicators. Consumption-related Google searches provide information about pre-consumption research and thus can help predict future consumption, and news-related Google searches provide information about changes in durable goods consumption.
Owen and Woo demonstrate that applying these insights improves forecasts of private consumption growth over forecasts that do not utilize Google Trends data and over forecasts that use Google Trends data, but do not take into account the specific ways in which it informs forecasts. These results will be of particular interest to policymakers who need to base policy on anticipated economic activity.
Owen interviewed on Marketplace
On an American Public Media Marketplace segment titled Who is going to pay the higher prices?, broadcast on Nov. 9, Owen discussed possible answers with reporter Amy Scott. Factors influencing whether or not prices might rise Owen suggested could include “how flush customers are feeling.” Should producers discern that customers were feeling financially comfortable, they might feel equally comfortable passing on price increases. At the same time, Owen pointed out, the fear of losing customers might also keep prices where they are.