x Abu Dhabi, UAETuesday 25 July 2017

'R-word' shows Google is an economic indicator

If Google is any indication, more people think we are headed for another recession.

The number of online searches for the words
The number of online searches for the words "recession" and "economy" globally rose from a year ago via Google, which handles more than 1 billion queries a day. Emmanuel Dunand / AFP

Recession has become a hot-button issue across the world if Google is anything to go by. Online searches for the "R-word" via the internet giant have jumped 12 per cent year on year.

And according to data released by the Centre for Economics and Business Research (CEBR) in London, the number of online searches conducted for the word "economy" globally also rose 4.5 per cent from a year ago via the search engine, which handles more than 1 billion queries a day.

Online surfers were especially curious about these two terms during the summer, when search activity rose to its highest level this year and "correlates to when markets started crashing", says Charles Davis, the head of macroeconomics at CEBR. "There's been a big uplift [in searching for these terms] since the summer."

Google declined to comment for this article, although the company commands more than 65 per cent of the market share in the online search engine industry within the US, according to ComScore data.

Web-based searches for terms such as "economy" and "recession" previously surged during the market crash of 2008.

Yet more recently, some professionals who closely follow market fluctuations have started following the ups and downs of online search activity to learn more about where the economy may be headed.

The Bank of England, for one, recently began tracking online search terms on Google "as part of the range of different indicators it considers in forming its view about the outlook for the economy of the United Kingdom", wrote Nick McLaren, one of the bank's analysts, in a quarterly bulletin this year.

Mr McLaren noted that the bank has found search data from Google can help to predict changes in the unemployment level as well as house prices - even better than existing economic indicators, in some cases.

But is it likely that other market experts and economists will consider which terms get searched on Google as a means to navigate through this uncertain financial phase?

"I think it'll be more of a trend," Mr Davis says.

Google has already reportedly been working on its own price index that would rely on its search data for economic forecasting.