German GDP is expected to increase by 1.8 percent (2015), 2.1 percent (2016), and 2.3 percent (2017). Economic activity is driven by consumer spending that increases in the upcoming years by about 2 percent per year due to strong increases in real disposable income.

In this paper, we examine the predictive ability of automatic and expert-rated media sentiment indicators for German inflation. We find that sentiment indicators are competitive in providing inflation forecasts against a large set of common macroeconomic and financial predictors. Sophisticated...