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Gary Shilling

Google Trends Is Now an Arbiter of Economic Downturns

There’s currently a high correlation between declining consumer confidence and the rising appearance of the word “recession” in internet searches.

Google searches underscore recession concerns.

Google searches underscore recession concerns.

Photographer: David Gray/Bloomberg via Getty Images

We didn’t need the reported two consecutive quarters of declining real gross domestic product —the unofficial determination of a recession—to tell us the US economy is already in, or at least close to, a business downturn. And we certainly don’t need to wait for many months for the official declaration by the National Bureau of Economic Research, the private research outfit that documents business cycles. Data release lags and revisions delay the NBER’s call.

All we need to do was look at the swelling appearance of “recession” in Google searches. Talk of recession not only tells you what’s happening on the ground but also increases a recession’s probability by scaring businesses and consumers. The nosedive in consumer sentiment, as revealed by the Conference Board and the University of Michigan surveys, is a clear confirmation of this feedback phenomenon.