Media Coverage as an economic indicator
Can the U.S. economy be predicted by reading the newspaper – or 15 newspapers? The Dow Jones folks think so. The Dow Jones Economic Sentiment Indicator “aims to predict the health of the U.S. economy by analyzing the coverage of 15 major daily newspapers in the U.S. using a proprietary algorithm to look for positive and negative sentiment about the economy in every article. ”
According to Dow Jones, the indicator has been back-tested to 1980 and is good at predicting trends about seven months out. I’m going to start following it and see how it does. Right now, it’s trending downward a bit in spite of constant news reports that the economy is recovering. Maybe I’m just reading the wrong newspapers. For example, yesterday I saw a report that auto sales are now predicted to reach around 13 million in 2010 instead of the previously predicted 12 million. Of course, that’s just one little stat. At any rate, for this news junkie with an MBA this is my cup of tea.