Pedestrians carry shopping bags on Black Friday through Herald Square in New York, U.S. (Photographer: Michael Nagle/Bloomberg)  

Google Searches Signal U.S. Consumption Intact, Economist Says

(Bloomberg) -- Google Trends data signal that U.S. retail sales, a key economic indicator that’s been delayed by the government shutdown, probably held up in December along with household consumption, according to an analysis by Renaissance Macro Research LLC.

Inquiries on the search engine indicate retail sales excluding autos and gas rose 0.3 percent in December from the prior month, putting fourth-quarter personal-consumption growth on track to accelerate to a 3.7 percent pace, Renaissance Macro head of U.S. economics Neil Dutta wrote in a report. Economists surveyed by Bloomberg estimated that measure of retail sales rose 0.4 percent after 0.5 percent in November.

It’s an unorthodox projection methodology, made somewhat out of necessity after the Commerce Department’s December retail report missed its scheduled Jan. 16 release because of the closure. A separate report from Johnson Redbook, which tracks a limited sample of results, showed December sales rose from a year earlier.

“We need to seek out other data sources to guide us,” Dutta wrote Thursday, calling Google Trends a useful source. “This makes intuitive sense. Shoppers could search for restaurants and retailers that are nearby. Moreover, given the prevalence of internet shopping, internet searches on brand names should correlate with sales.”

Dutta seasonally adjusted monthly Google data for several retailers -- from Gap Inc. to Bed Bath & Beyond Inc. and Nordstrom Inc. -- to track the annual change in search growth with the historical sales data over the same period.

Such projections are the latest example of the shutdown forcing analysts to focus on alternative data to gauge the economy since key indicators went dark late last month. Analysts say other sources of information, from surveys and private-sector data to corporate earnings reports and data from ports, are becoming more important.

JPMorgan Chase & Co. also sees value in alternative economic data from Google Trends and other technologies. They offer visibility into activity that traditional measures miss, and with a shorter lag, though do have challenges such as short histories, collection systems that are prone to change and inconsistent samplings, bank economists wrote in a report last week.

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