Industrial Production Index and the Web: an explorative cointegration analysis

In this paper we explore the relationship between the Industrial Production Index (IPI), the confidence index for the manufacturing sector and its sub-indexes and Google searches for several words linked to the economic situation, for the period January 2004 - September 2016 on Italian data. Significant correlations between the selected indicators point to probable comovements of same. Adding one observation at a time since the first forewarning signs of the 2008 crisis, we find that a few Google searches and the IPI cointegrate, particularly during the strong downward trend leading to January 2009, while no confidence indicators cointegrate with the IPI. These findings suggest that concern about economic conditions expressed through searches in google and the IPI or the confidence indexes are influenced by common circumstances. Recursive forecasts of the IPI through VECM models suggest that the evolution of the IPI can be well mimicked using the real time Gtrends selected variables