Forecasting GDP in Europe with Textual Data

Business and consumer surveys are an essential tool used by policy-makers and practitioners to monitor and forecast the economy. Their most valuable feature is to provide timely information about the current and expected state of economic activity that is relevant to integrate the sluggish release of macroeconomic indicators. Interestingly, surveys are often interpreted as measures of economic sentiment in the sense of providing the pulse of different aspects of the economy, such as the consumers' attitude toward spending or the expectation of purchasing managers about inflation. Some prominent examples are represented by the Survey of Consumers of the University of Michigan (MCS) for the United States (Curtin and Dechaux, 2015) and the Business and Consumer Survey (BCS) for the European Union (European Commission, 2016). Although surveys are very valuable and accurate proxies of economic activity, they are typically released at the monthly frequency which might limit their usefulness in high-frequency nowcasting of economic variables (Aguilar et al., 2021; Algaba et al., 2023).