Google Trends Is Now an Arbiter of Economic Downturns
We didn't need the reported two consecutive quarters of declining real gross domestic product —the unofficial determination of a recession—to tell us the US economy is already in, or at least close to, a business downturn. And we certainly don't need to wait for many months for the official declaration by the National Bureau of Economic Research, the private research outfit that documents business cycles. Data release lags and revisions delay the NBER's call.
All we need to do was look at the swelling appearance of “recession” in Google searches. Talk of recession not only tells you what's happening on the ground but also increases a recession's probability by scaring businesses and consumers. The nosedive in consumer sentiment, as revealed by the Conference Board and the University of Michigan surveys, is a clear confirmation of this feedback phenomenon.
When consumers and businesspeople suffer adverse economic conditions, they worry and talk about a recession. These aren't esoteric measures that economists ponder like declining job openings and the inverted yield curve. Instead, they're basic gut issues. And there's currently a high correlation between declining consumer confidence and the rising appearance of “recession” on Google.
Other examples are numerous, such as the leap in gasoline prices to over $5 per gallon. There's a 78% correlation between the surging mention of “recession” on Google and rising fuel costs this year. Drivers notice the price rise since they fill their tanks frequently. It's not like a water heater that is only replaced when it leaks, and after 20 years of service, who can remember the cost of the old one? With the November elections looming, the political implications of rising gasoline
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