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Press Release

GDP/GDI mix and seasonal patterns; Google searches and consumer confidence: Cleveland Fed researchers

GDP and GDI mix appears to dampen, but not eliminate, seasonal patterns in data on economic activity, says Cleveland Fed researcher

Seasonal adjustment is a statistical process used to remove predictable patterns in a data series which arise due to timing within a year and which make it harder to see the broader trend in the data. When the Bureau of Economic Analysis constructs a data series like real GDP, it tries to remove seasonal factors from the many underlying individual series. However, when those individual series get added together, the aggregated result can contain residual seasonality, says Federal Reserve Bank of Cleveland economist Daniel Carroll. He notes that some analysts discounted the estimated Q1 decline in real GDP in part because it fit with the residual seasonality present in the data.

Some have suggested that using a mixture of real GDP and real GDI (gross domestic income), could be a better measure of economic activity, and soon the BEA will produce a 50/50 mix of the two data series.

While the exact details of how that mixture will be produced are not yet known, using published data,  Carroll constructed a 50/50 mixture. He found that, while combining the two appears to soften the degree of seasonality, the 50/50 mix still has residual seasonality.

Carroll says there is no one-size-fits-all method for completely removing the effects of seasonal movements in data. He notes this is especially true for measures of macroeconomic performance like GDP and GDI, which are built from many smaller components.

Read Combining GDP and GDI for a Better Measure of the Economy Could be Tricky

Internet word searches may provide more timely information about changes in consumer confidence, say Cleveland Fed researchers

For many traditional economic indicators, there’s a lag between the current time and the most recent data point. Studying the words and phrases people use in internet searches has the potential to fill that gap, according to researchers from the Federal Reserve Bank of Cleveland. They note, for example, that a Google search volume index (SVI) for the word “recession” tracks closely the well-known measure of consumer sentiment produced by the University of Michigan Survey Research Center.

While promising, the researchers say this approach also poses a challenge. Using Google search volumes to construct economic indicators relies on the fact that people are searching for things they care about, but those can change over time. To judge the usefulness of SVI for another set of terms that would be expected to be related to consumer confidence, the researchers compare the SVI results to returns on the S&P 500, “a market-based reflection of confidence and expectations for future economic growth.

Among the patterns they find:

  • Google search interest in “gold prices” is negatively related to stock prices. Gold prices tend to be countercyclical, so when consumers stop searching for that phrase, the researchers say it’s a good sign that they may invest more heavily in stocks.
  • Searches for the word "unemployment" may be the key to changes in expectations of future consumption. Both changes in unemployment and these expectations could have an effect on future economic growth, which would in turn affect stock returns. 

Read Assessing Consumer Confidence with Google Search Terms

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell,, 513.455.4479