'Better Hope This Is A Blip' - Spending & Credit Search-Trends Are Tumbling

In a Bloomberg column on May 4th, Jim Bianco and Ben Breitholtz of Bianco Research argued convincingly that economic surveys no longer work as a predictor of future economic activity, because surveys (the so-called soft data) suffer from a circular reference due to groupthink, herd mentality, and political preferences.

Not only that, Bianco and Breitholtz show not only that the surveys are biased, they have a poor track record - but don't tell the Fed, they think surveys are the holy grail of economic forecasting.

Therefore  Bianco Research's team  has been arguing that google searches are better than the surveys and should be used in their place (and as they show below, offer some very different 'real' insights than the herd mentality of surveys).

*  *  *

Originally posted to Bianco Research clients,

Consumer searches (Google) indicate low anxiety, but deteriorating spending, credit, and business formation. Our nowcast for Q2 GDP resides at 3.12% year-over-year, below similar forecasts by the Atlanta and New York Fed.

Comment

The chart below shows our nowcast for U.S. real GDP during Q2 2018 rising to 3.12%. We employ Google search trends for over 180 major categories measuring consumer and business behavior. The words entered into Google’s little black search box provides a real-time and purer assessment of consumer desires, needs, and biases.

Consumer search trends are generating lower expected GDP for Q2 than the Atlanta (4.8%) and New York Fed (3.3%).

The 20 most important search trends for forecasting GDP are shown below. Darker and larger circles indicate greater importance within our ridge regression and boosted tree models.

Social networks, oil & gas, heavy machinery, and home financing stand at the top of the totem pole.

The next series of charts show six-month changes in search trends by category. 

The first chart shows the level of anxiety felt by consumers by measuring searches for stress, drug use, hypertension, depression, and more. Anxiety has indeed abated to levels seldom seen post-crisis. Traditional surveys are soaring high, which may explain much of this relaxed nature of consumers.

But, consumer spending has been rolling over into the spring of 2018. The next chart looks at changes in searches for apparel, home improvement, autos, furniture, and more. The dwindling popularity of these types of search has reached the fastest pace of decline since 2009.

Will this be a momentary blip or a lasting shift in trend?

Credit searches are also falling, led by home financing. We have offered analysis of credit card delinquencies, which we expect to climb across the top 100 banks to 3.7% over the next year.

Small businesses, one of the main engines of the economy, are seeing less frequent searches for business formations, credit, and venture capital.

Financial conditions have modestly tightened, but a greater crimp is likely coming with an additional three-to-four hikes by the Federal Reserve.

*  *  *

Bianco and Breitholtz conclude with an ominous warning for The Fed (and investors) that their search trend data shows the economy is 'ok' but far from booming, raising concerns that:

My fear is the oldest story in finance is going to play out.

The Fed intensely watches the soft survey data and thinks the economy is booming and inflation is about to come roaring back.

They hike too much and invert curve and that impairs the economy.

Read more here at Bianco Research...

Comments

s2man notfeelinthebern Thu, 06/07/2018 - 13:06 Permalink

It is not Google's fault Amazon carries everything and has a web page for each item.  My last several orders from Amazon were for for obscure workshop and shipping tools.  Each order was fulfilled by four different vendors, only one of which was Amazon. 

So, Amazon has become an advertising platform.  Let's say you own staplesRus .com, and you carry a special stapler which is not on Amazon.  You mearly create an ad for it and wait until I decide which model to buy.  Hey, you're the only one offering it!  You get my order and I didn't have to search the web to compare models.

Disclaimer:  I use duckduckgo search engine.

 

 

In reply to by notfeelinthebern

shortonoil JohnGaltUk Thu, 06/07/2018 - 08:32 Permalink

Any growth that is now being experienced by the US, and other developed economies is coming at the expense of the collapse of emerging market currencies. Capital is now flowing from the periphery to the core. The peripheral economies will continue to contract as the core economies extract their wealth and remain some what prosperous. That will continue until the entire world has become like Venezuela! The oil age is coming to its conclusion, and the game is now who will be the last man standing.

http://www.thehillsgroup.org/

In reply to by JohnGaltUk

house biscuit shortonoil Thu, 06/07/2018 - 10:36 Permalink

A dramatic prognostication followed by a link.....

.....it's the reason many of us come to ZH

I have trouble with the prima facie assumptions re: peak oil

Why?

Because I do not assume oil demand/supply are driven only by market forces

My suspicion is that the lovely angels who own the oil business might, you know, manipulate things like that.....

In reply to by shortonoil

pods Thu, 06/07/2018 - 08:09 Permalink

The Fed has to hike quickly so they can cut on the impending next leg down of this depression. NIRP is the way of the future.

pods

Adolfsteinbergovitch Thu, 06/07/2018 - 08:10 Permalink

 

  1. Strange that popular search terms do mention neither PM nor cryptos
  2. No wealth preservation strategy? 
  3. Anxiety falling because of opioid crisis or apathy? 
  4. No future? 

The situation is dire. I smell resignation and demoralization. 

Phillyguy Thu, 06/07/2018 - 08:40 Permalink

Consumers are completely tapped out. The average working person has almost zero savings.

Current state of the US economy- 1) The majority of new jobs created since 2005 are “temp” positions- read low pay, no benefits or job security, 2) Half of US families cannot afford basic living expenses. 3) 70% of college graduates leave college with circa $37 K in debt. 4) 60% of Americans do not have $500 in savings and cannot afford a $1000 medical emergency or major car repair. 5) There have been 5 suicides (1 per month) by NYC cab drivers who cannot cover the costs of the medallions required to operate a cab in the city. These financial problems have been compounded by increasing costs for rent, medical care and education and more recently, by Trump’s economic policies.

Since the financial crash in 2008, Equity markets and [still] insolvent banks have been propped up with almost unlimited amounts of ultra-cheap money from the US FED (circa $4 trillion) for share buybacks and MA deals; this money has also inflated the bond market and trendy real estate in Boston, NYC, SF, Portland, Seattle, etc. Meanwhile, government debt has exploded- US government debt is $21 Trillion (does not include municipal, corporate or consumer debt) and will continue growing following enactment of Trumps military appropriation and his large tax cuts, primarily benefiting wealthy Americans. To my knowledge, no economist, banker or politician has figured out how to run an economy on ever expanding debt and money printing in perpetuity. Bottom line- the average American working person is facing a very bleak economic future.

Let it Go Thu, 06/07/2018 - 09:02 Permalink

Among all the recent news about euphoria and a market "melt-up" several reasons exist to be cautious. During the last two and a half years central banks and countries around the world have added more fuel to the fire which has postponed the day of reckoning. This has made all of us thinking the market was about to turn south looking rather silly and underscores the fact that trying to time economic events is both confusing and complex. Still, the fact the numbers do not work means reality will be visiting us soon. The reasoning is outlined below.

http://Economic Reality Will Soon Be Knocking On The Gate.html

Byte Me Thu, 06/07/2018 - 09:16 Permalink

Because 'Goggle Search' is the fount of knowledge in the new, liberated, bolloxed-up reality of the CBs.

I use it too - from time to time...

But I don't hold a FuckFone to my head or near it EVER.

Or own one.

Nearly rode into SEVEN "phone zombies" while shopping today.

This is becoming a health hazard for sensible peeps.

(The erk that was seen hereabouts texting while 'no-hands' on the handlebars hasn't been seen for three months. Maybe he's grown up. Who cares, this is Darwinian selection)

Quinvarius Thu, 06/07/2018 - 09:20 Permalink

Blame Kudlow and his king dollar bullcrap for this.  The guy is a complete idiot undoing Trump's successful policy of weakening the Dollar.  Kudlow is not a real economist.  He is a pro-banker, pro-stock market manipulation financial engineer who only understands how things worked in the 80's--When we had a functional economy that could bleed production jobs.  The dude is a GD idiot when it comes to real economics and job creation in a competitive world. 

Believe it or not, Kudlow, basic economics does promise that a constantly strengthening currency is bad for jobs.  It doesn't matter if you are manipulating stocks higher.  Learn it, clown.  in another 6 months the 100% predictable damage you are doing to Trump's recovery is going to start becoming apparent.  Did this work for Obama?  No.  Did it work in our favor during the lifespan of NAFTA? No.  Idiot.  The dollar is already 20 percent overvalued.

MoreFreedom Quinvarius Thu, 06/07/2018 - 13:22 Permalink

I see Kudlow, not so much as a pro-banker, pro-stock market manipulator, as he's a big government RINO looking to get hired by politicians.  He always focuses on tax reform (somewhat helpful assuming rates go down), as opposed to cutting spending (more harmful than reducing tax rates helps).  The RINO strategy is to always blame the tax code, rather than focus on, or even mention, the spending. 

He knows the political game.  Politicians want control over commerce to get rich. 

In reply to by Quinvarius

mo mule Thu, 06/07/2018 - 09:28 Permalink

I totally quit facebook a little over 2 years ago, but I haven't quit google completely, I use Duck Duck Go for search engine now, but I still have google for my email and web browser.  I wonder who is out there that's maybe better?  Damn Liberals, just can't trust them.    

resistedliving Thu, 06/07/2018 - 10:47 Permalink

Others have said:  Fifth Ave?  West Village?  like Death Valley w/ FOR RENT signs

BARNEY's closed UWS but then again SEPHORA opened.  Does ladies make-up in the Front Window!  (puke)

(SEPHORA closed the other one across the street = Wash)

Can get same day RSVP at any restaurant maybe excepting I Sodi or Malatesta $14 specials

40-60% SALES everywhere but i guess thats typical heading into the Summer

Rents are dropping albeit from Hysterical to Insane

slowimplosion Thu, 06/07/2018 - 11:06 Permalink

I find the idea that the Fed can QE for almost a decade and then somehow drift back to "normal" without anyone's ox getting gored to be a ludicrous one. 

 

There is going to be pain.  It is as inevitable as the sunrise.  Folks that think the Fed can "finesse" their way out of it are delusional.

 

What these folks really want is to maintain the status quo.  Not fucking going to happen.

Bemused Observer Consuelo Thu, 06/07/2018 - 11:44 Permalink

Yes...and I believe that this will happen. Traumatized consumers snap their wallets closed, and no amount of coercion will get them to open them again. It happened during the Depression...the 'spending party' came to an end, and things did not reverse for a generation. So traumatized were those folks, that it wasn't until their CHILDREN came of age that the consumer took off again.

Oh yes, it CAN happen again, and the current crop of 'investors' will die of old age waiting for a reversal.

In reply to by Consuelo