'Nowcasting' the Belgian Economy

This paper leverages the interface Google Insights for Search to 'nowcast' Belgian macro-economic indicators such as retail consumer spending and unemployment. Using a general ECM framework, the analysis demonstrates that economic fluctuations correlate with Google search intensity. In particular, a 10 percent increase in the intensity of search tends to increase retail spending and unemployment claim fluctuations by about 0.5 and 0.4 percent (respectively) in the same month, for a total effect culminating after one quarter of about 2 and 1 percent, respectively. Disaggregating retail sales by sub-category, such as food or apparel sales, we found similar estimates of search elasticities to sales fluctuations. Additionally, we find that for food retailing, search queries also correlate with level, on top of fluctuations of sales. In general, search queries explain between 16 to 46 percent of the variance in fluctuations in retail sales and unemployment in Belgium for the period 2004 to 2011