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Bank of England uses Google to track latest trends

The Bank of England has started using data on Google searches for key economic terms as a way of tracking the economy in real time.

Searches for terms such as “Jobseeker’s Allowance” and “estate agents” provide telling insights into current and future trends in unemployment and house prices, researchers at the Bank found.

The search data are particularly helpful because they are available immediately and on a daily basis, whereas most traditional economic data are only available on a monthly or quarterly basis – providing a troublesome lag between what is happening in the economy and the point at which economic officials find out about it.

In the case of house prices, the Bank believes that trends in searches for estate agents have been a better predictor of future house prices than even established surveys by property bodies such as the Royal Institute for Chartered Surveyors or the Home Builders Federation.

Searches for Jobseeker’s Allowance, meanwhile, are at least as reliable as a way of gauging current unemployment rates as the actual number of claimants for the main jobless benefit. Official unemployment figures for a particular period are only available about six weeks after the end of that period.

The data could be helpful in producing the Bank’s so-called “nowcast” – a prediction of the current state of the economy, based on the latest available information. The Bank uses a “nowcast” because official data from the Office of National Statistics are often slow to appear and the Bank does not always trust some early estimates of data because they are frequently revised.

“Internet search data have the potential to be useful for economic policymaking,” Nick McLaren and Rachana Shanbhogue wrote in an article for the Bank’s quarterly bulletin. “Monitoring current economic activity closely is an important aspect of policymaking, but official economic statistics are generally published with a lag.”

The Bank said that it “will continue to monitor these data as part of the range of different indicators it considers in forming its view about the outlook for the economy of the United Kingdom”.

Source : Daniel Pimlott & Tim Bradshaw - FT.com
www.ft.com/cms/s/0/f9550984-952e-11e0-a648-00144feab49a.html#axzz1PBeFwqU7

13 June 2011
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