Ellison Chair in International Floriculture
Ellison Chair in International FloricultureTeaching, Research, Extension and Service

Can Google search trends predict economic activity?

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Yes, according to Google economist Hal Varian:

Can Google queries help predict economic activity? The answer depends on what you mean by “predict.” Google Trends and Google Insights for Search provide a real time report on query volume, while economic data is typically released several days after the close of the month. Given this time lag, it is not implausible that Google queries in a category like “Automotive/Vehicle Shopping” during the first few weeks of March may help predict what actual March automotive sales will be like when the official data is released halfway through April.

Our work to date is summarized in a paper called Predicting the Present with Google Trends. We find that Google Trends data can help improve forecasts of the current level of activity for a number of different economic time series, including automobile sales, home sales, retail sales, and travel behavior.

Here’s an excerpt from the paper’s introduction:

Google Trends provides daily and weekly reports on the volume of queries related to various industries. We hypothesize that this query data may be correlated with the current level of economic activity in given industries and thus may be helpful in predicting the subsequent data releases.

We are not claiming that Google Trends data help predict the future. Rather we are claiming that Google Trends may help in predicting the present. For example, the volume of queries on a particular brand of automobile during the second week in June may be helpful in predicting the June sales report for that brand, when it is released in July.

Make your email count

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Given the number of emails you send every day, you should be an email-writing expert, right? In case not, here are a few tips for effective messaging:

  1. Ask for something. All business writing includes a call to action. Before you write your email, know what you’re asking of your audience.
  2. Say it up front. Don’t bury the purpose of your email in the last paragraph. Include important information in the subject line and opening sentence.
  3. Explain. Don’t assume your reader knows anything. Provide all pertinent background information and avoid elusive references.
  4. Tell them what you think. Don’t use the dreaded “Your thoughts?” without explaining your own. Express your opinion before asking your reader to do the same.

Source: Management Tip of the Day, Harvard Business Publishing

This week's highlights…

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  1. From Table 10 in today’s BEA report on Personal Income, real disposable income increased 2.2% in February, compared to February last year. This is the 5th consecutive month of positive growth in real personal income compared to the same month in the previous year, following negative growth in August and September of last year. The 2.2% increase in real disposable income is just slightly below the 2.3% average over the last four years.
  2. Rates on 30-year mortgages plunged this week to the lowest level on record after the Federal Reserve launched a new effort to assist the staggering U.S. housing market. Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.85% this week, from 4.98% last week. It was the lowest in the history of Freddie Mac’s survey, which dates back to 1971. FYI — in the 1981-1982 recession, mortgage rates peaked at about 18.5% in October 1981. The difference in monthly payments on a $100,000 mortgage at 18.5% ($1548) and a mortgage at today’s 4.85% ($528) is more than $1,000 per month!
  3. The National Association of Realtors (NAR) released its latest Housing Affordability Index (HAI) today, showing that housing affordability reached an all-time, historic record high of 173.5 in February. A HAI of 173.5 would mean that the typical household earning the median family annual income of $59,726 in February would have 173.5% of the qualifying income to purchase a median-priced existing single-family house ($164,600) with a 20% down payment, which would be the highest level of housing affordability since the NAR started reporting housing affordability in 1971.

  4. This week we are seeing some further positive notes in form of better-than-expected new and existing homes sales and durable goods orders for the month of February. These, and other positive, or even “less bad”, signs are a welcome change of tune.

BB Blues…

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Nothing like being on vacation in a remote area of Texas to remind me of the woeful cellular coverage of my Blackberry 8800 (AT&T;). Actually, it’s more of a reminder of my addiction to technology, but that’s another matter altogether.

Back to my original point. My wife’s freebie cellular phone consistently puts my BB to shame, getting 3-4 more strength-of-signal bars, even at home. I’d be curious if anyone has found a work-around or fix (to my coverage problem, not my addiction). I wonder if the new BB Bold performs better? Surgical implantation of rabbit ears?

Comments welcome as usual.

Sway: The Irresistible Pull of Irrational Behavior

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Recently finished the book entitled “Sway: The Irresistible Pull of Irrational Behavior.” A quick read that makes some interesting points about irrational behavior; something I knew little about of course!

The main point of the book is that we all act irrationally from time to time (some of us lots of the time) and there are predictable forces that cause us to act irrationally including the following:

  • Loss aversion – this is a form of playing not to lose, making decisions in order to cut our losses, or avoid further losses.

  • Commitment – this is our tendency to hold fast to our course of action in the face of accumulating losses. Their example: Steve Spurrier and the Gators. When Spurrier came to UF in the early 90’s the SEC was a grind-it-out conference where coaches played, conservatively ( i.e. not to lose). Spurrier brought in the Run-N-Gun and started whipping the rest of the old, storied SEC programs. In response, the other teams stayed committed, and stuck even harder to their old models. And the Gators kept winning…much to the chagrin of us UT alums.

  • Value attribution – we attribute value to people or things based on quick impressions. In other words, if the right people like something we attribute greater value to that thing than if the wrong people like it.

  • Diagnosis bias – once we diagnose a situation we see the world through the lens of that diagnosis and all of reality conforms to our bias.

  • Fairness perception – we’ll often act against our own best interests if we feel that we are being treated unfairly. There is a cool experiment he talks about involving two subjects. Someone offers them a sum of money, let’s say $100. One person gets to divide it any way they want and the other person can decide to accept or reject that division. If the second accepts they both get the money per the division by the first. If the second rejects, they both get nothing. Most of the time the first person divides it 50-50, the second accepts and they walk away happy. But, when the first person makes an imbalanced division – let’s say he keeps $70 and offers the other $30 – in pretty much every case the second rejects it. In either case, whether it was a 50-50 or a 70-30 split, the second person would have come out to the good, but in the second case they rejected their own gain because of the fairness perception.

  • Altruism-Pleasure conflict – people will perform better for altruistic motives than for rewards. In other words, if someone does something for altruistic motives and then you come back and offer them a reward for doing the same thing, you will often find them losing motivation and/or performing worse. You gotta read that chapter to understand how it works.

  • Group Conformity – when in group settings, people tend to stifle their own opinions, often when their own opinions are patently correct and the groups are patently false, to go along with the group.

Want to hear more from one of the authors himself? Click on the video below (it is preceded by a short ad).

http://www.hulu.com/aol/http%3A%2F%2Fvideo%2Eaol%2Ecom%2Fpartner%2Fhulu%2Fbusiness%2Dbook%2Dbriefs%2Dbusiness%2Dbook%2Dbriefs%2Dsway%2Dby%2Dori%2Dbrafman%2Dand%2Drom%2Dbrafman%2Fbw8yXCbaH%5F%5Fdf2%5Fw%5F%5FD8DBP7hOyjxWAm/embed/c1iqyuRVtZHIAM1xTq8dyA

Go to the book website for even more information.

Latest energy outlook report released

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According to the early release of the Energy Information Administration’s (EIA) Annual Energy Outlook 2009 (AEO2009), the latest projections expect virtually no growth in U.S. oil consumption for the first time in more than 20 years.

EIA said that the combination of recently enacted CAFE standards, requirements for increased use of renewable fuels, and an assumed rebound in oil prices as the world economy recovers will reduce oil consumption. U.S. net dependence on imported liquids will decline dramatically over the next 20 years as the use of biofuels is expected to grow.

After averaging $101.46 in 2008, EIA projects a barrel of crude oil to average $63.53 in 2009, $82.09 in 2010, $91.59 in 2011 and $102.52 in 2012. In fact, after a nearly $40 drop in price projected for this year, it does not predict it will fall year-over-year again through 2030, the date the projections end.

EIA projects a sharp increase in the sale of unconventional vehicle technologies such as flex-fuel, hybrid and diesel vehicles, with plug-in hybrid vehicle (PHEV) sales projected to grow to 90,000 vehicles annually by 2014. In addition, they expect ethanol use for gasoline blending to increase to 12.2 billion gallons and E85 consumption to rise to 17.3 billion gallons in 2030.

Total number of miles traveled by freight trucks is expected to decrease slightly in 2009, EIA said, falling from 231 billion miles driven in 2008 to 226 billion miles in 2009, before increasing to 232 billion in 2010 and 244 billion in 2011.

Floriculture survey deadline approaching

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Floriculture producers in the following states who generate $10,000 or more in gross annual sales are urged to complete the U.S. Department of Agriculture’s annual Floriculture Production Survey by mid-January. Surveys were mailed on Dec. 8, 2008.

The states included in the annual survey include California, Florida, Hawaii, Illinois, Maryland, Michigan, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Texas, and Washington.

The survey provides the only detailed information about the production and sales of cut flowers, flowering, bedding and foliage plants, and cultivated florist greens. Without grower input, the government is left without the necessary data to gauge these crops’ contribution to the nation’s economy. In 2007, the combined wholesale value for the 15 states surveyed was $4.1 billion.

Growers can use the information as a benchmark to identify state and national trends. Government policymakers use the data at the state and national levels to appropriate resources. Reliable data is also crucial to obtaining research funding, government support and ensuring the industry receives its fair share of limited funding. Ten major floriculture organizations have endorsed this effort and their presidents have signed the letter accompanying the survey.

If you have received one of the surveys, please take the time to complete it if you have not already done so. Producers who fail to return a completed questionnaire by Jan. 20 will be contacted by telephone or in person to complete the survey.

How Recessions Impact Consumer Spending

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Recessions affect consumer spending unevenly. In most categories, individuals reduce their spending, but in a few categories they actually increase it. A recent McKinsey analysis of consumer spending during the 1990-91 and 2001-02 downturns shows that during these periods U.S. consumers spent less on amenities such as restaurant meals, personal-care products and services, apparel, and entertainment. But they spent more on groceries and reading materials — both of which substituted for more expensive options — as well as on less discretionary items like insurance and health care. Spending on education showed the biggest increase.


SOURCE: “Industry Trends in the Downturn: A Snapshot,” The McKinsey Quarterly, December 2008.

Michael Porter on Charlie Rose

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Michael Porter’s talk with Charlie Rose on the U.S. economy is getting a lot of buzz online right now. In the 25-minute interview, Porter restates his case from Business Week for why we need an economic strategy and talks about the systemic issues America faces, and its core strengths.

Some highlights: Porter says he’s excited by the potential for this administration to put together an overarching strategy that might address our problems in

  • Public k-12 education;
  • energy
  • high cost of doing business
  • lack of a safety net for workers during job transitions (healthcare security, training, pensions).

Porter says we have some strengths to reinvest in:

  • our science technology system. investment rate has slowed.
  • our belief in competition. We have in the last few years become more protectionist

The silver lining of the crisis is we might get an America:

  • that saves again
  • with a new sense of community responsibility
  • and prudence in business

Porter says this crisis will cause others to doubt this system. This is best system we know for creating economic opportunity. this does not help the cause of capitalism in Latin America.

All in all, a good lunch-time listen. Or better yet, read his piece in Business Week, linked above. It’s a more cohesive argument and it won’t take you 25 minutes. Plus you’ll see some of his underlying logic, and learn interesting facts.