From The Economist
Internet search data may be useful for forecasters
Claims of clairvoyance, particularly when they come from economists, deserve a sceptical reception. Hal Varian, a professor of economics at the University of California, Berkeley who also happens to be Google’s chief economist, has no such pretensions, but he does believe that data on internet searches can help predict certain kinds of economic statistics before they become available.
In a new paper written with Hyunyoung Choi, a colleague at Google, he argues that fluctuations in the frequency with which people search for certain words or phrases online can improve the accuracy of the econometric models used to predict, for example, retail-sales figures or house sales. Actual numbers for such things are usually available only with a lag. But Google’s search data are updated every day, so they can in theory capture shifts in consumer behaviour before official numbers are released.