The Bank of England is now monitoring what Brits search for on the Internet and post on social networks such as Facebook to help it gauge how the economic recovery is doing and decide whether to change interest rates.
According to the BoE’s chief economist, Andy Haldane, a new special taskforce has been set up to monitor Internet searches and social network patterns for early signs of the state of the economy.
Mr. Haldane, who is in charge of the team, has been tasked with finding out how new sources of data might help the central bank gain a better overall picture of the UK’s economic health.
In an interview with Sky News, Mr. Haldane said the BoE believes social media and Internet search data may offer more timely information than the official data.
For example, when researching on inflation and unemployment, analyzing Internet job searches or online prices might give economists deeper and more relevant insight.
Mr. Haldane is the Chief Economist at the Bank of England and Executive Director, Monetary Analysis and Statistics. He is also a member of the Bank’s Monetary Policy Committee. (Photo: BoE)
Mr. Haldane explained that official data lags the information one can glean online. Data coming from the internet and social media websites give us information on what is going on now.
He added that these and other informal data sources “have been somewhat more reliable in picking up the uptick in the fortunes of the economy.”
Be careful with Internet trends data
Tom Worstall wrote in Forbes that the BoE needs to be careful when using Internet trends to decide policy. He points to the Google Flu experiment, where Google Trends monitored users’ searches for cures and symptoms of influenza. The experiment was a bit of a disappointment. Gathering and analyzing search data did not help researchers determine the incidence of flu in different areas.
Mr. Worstall wrote:
“The crucial point here is that economists are always saying, this is what they mean by revealed preferences, is that you shouldn’t pay too much attention to what people say, rather to what they actually do. Only then are you observing feelings, opinions, strong enough to actually get people up off the couch and it’s only at that point that we can really say that those feelings and or opinions are important.”