Forecasting GDP figures from Internet transactions

March 30th, 2010

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GoldMoney. The best way to buy gold & silverRecently, we received an email from the guys at the Consumer Metrics Institutes (and we have NO affiliate relationship with them other than mutual favours of mentioning each other on our web sites). They have a very interesting methodology of data collection on the demand-side of the US economy. You see, the GDP data that comes out of the government data office are always backward looking by a few months. Worse still, they are always revised. As Consumer Metrics Institutes wrote,

… many ‘leading’ economic indicators are published, but few (if any) are sufficiently ‘leading’ to be meaningful to investors. In fact, many ‘leading’ indicators use the prior month’s equity market results as a key component of their indexes. Investors may find their last month-end account statement more timely.
To remedy this, the Consumer Metrics Institute has developed (and is continuing to develop) techniques for monitoring ‘up-stream’ economic activities on a daily basis.

What the guys at Consumer Metrics Institutes do is that they collect data based on real-time US consumer Internet transactions (see this document for more information).

Of course, their metrics are not perfect and they are aware of some potential biases. For those who are interested in statistics, you may want to look into that here.

One question we asked them is this: how do they capture the consumers’ purchase right at the transaction level on a web site? Their answer was,

Unfortunately I can’t comment, since obviously the only way to do that is to keep a very low profile. We have been working on the methodology for a long time, and we have been facilitated by a lot of sloppy coding at the? commerce sites.

We like their style! 😉

We remember some of our readers (“Anon”) express their belief that the US GDP figures will soon show contraction (i.e. a double-dip) as the stimulus money are withdrawn from the economy. Here, is what the data from Consumer Metrics Institute shows:

Consumer Metric Institute's Daily Growth Index vs BEA's Quarterly GDP over the past 4 years

Consumer Metric Institute's Daily Growth Index vs BEA's Quarterly GDP over the past 4 years

Assuming that their data is more forward indicator than BEA’s figures, we will see the lagging GDP shrink in the second quarter of 2010.

Fingers crossed!

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  • Pete

    One word: “Whoa!”

    Great article CIJ, very interesting.

  • Anon

    Hmm, that looks worse than i thought 😛

  • temjin

    Excellent find there ed!

    The potential biases are clear, but it still gives a good picture of the overall economy that chart surely shows a good statistical correlation between their indexes and official quartely GDP numbers.

    Let us know again if you found any more of these leading indicators.

    Temjin (still on holiday right now, so lack of comments lately hah)