Tracking the Business Cycle Through Google Trends

Google Trends is a cool tool that has been around for a few years that tracks search volume and news reference volume for various words and phrases.  We like to use it as a sentiment gauge of the public.  Below we highlight the Google Trends result for the word "recession."  As shown, there was a big spike at the start of 2008 when the economy began to stumble.  Then it died down only to spike again in Q4 '08 when things got really bad.  Over the last couple of months, however, the "recession" worries seem to be dwindling again, but they are still elevated.  It's also interesting to note how little chatter there was about it in 2004, 2005, 2006, and 2007. 

 

When you run a Google Trends search, you can also click the "More news results" link and it will take you to a lesser known page that highlights the number of news story results that go back decades and even centuries in some cases.  This is also a very cool tool that allows you to see how much the media was talking about certain things on a long-term basis.  Below we highlight the news trend results for a number of financial terms that Bespoke readers might find interesting. 

The first one is for "recession" again, and as shown, the spikes obviously came during recessionary periods.  But what is interesting is that the term has gotten more and more popular with each subsequent recession, so the buzz has gotten louder and louder as the media world has grown.

 

A "depression" search is also interesting, and it goes all the way back to 1800.  Many are comparing the current recession to the Great Depression, but as shown below, the public is still a lot less worried about depression than they were in the 1930s.  On a side note, a "depression" search will also find articles about the mental condition.  At the start of 1980, "depression" started showing up more and more in articles, as the condition got diagnosed and researched more and more in the health care sector.  While the condition has been around forever, it's interesting to see how it gained popularity as the diagnosis and ways to fix it moved more into popular culture.

 

A search for "oil" shows that the most recent spike in price over the last few years also saw the biggest spike in its use in news stories.  Its use also trended higher as the Industrial Revolution grew around the world in the 1800s and early 1900s.  Once you get past 1960, the term only spiked when prices spiked.

 

"Real estate" goes all the way back to 1720, and as shown, it was much popular in the late 1800s and early 1900s than it is now.  It was even more popular in the 1980s than it was during the most recent real estate boom.

 

"Bear market" showed up more during the 2000-2002 bear than it does now, although it has spiked over the last couple of years.  Interestingly, "bull market" rose throughout the 1990s as the bull market raged, but it didn't really pick up as much during the most recent bull market from 2002-2007.

 

 

Finally, we highlight a news reference search for "economy."  Regardless of the direction of the business cycle, the "economy" has been on an increasing trajectory since 1860.

 

 

Comments

[David3]

I came across this paper a few weeks ago on using Google trends to predict events.

http://www.google.com/googleblogs/pdfs/google_predicting_the_present.pdf

[Red]

Great stuff, it would be interesting to build aggregations and indexes off such queries.

[gold and silver blog]

A few weeks back, I looked at Google Trends in relation to tops and bottoms for the price of gold.

At the top, there was a huge spike for "sell gold". At the bottom, there was a huge spike for "buy gold".

http://goldandsilverblog.com/what-can-google-trends-tell-us-about-gold/

[San Fran Sam]

Another thing to keep in mind is that the words "Depression" and "Recession" were not in general use to describe economic conditions. Prior to the 30s, economic set backs were called Panics. as in the Panic of 1907 and the Panic of 1873.

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