Investigating the predictive ability of ONS big data‐based indicators

This paper investigates the predictive ability of a brand new dataset that is based on big unstructured data published by the UK Office for National Statistics as “Faster Indicators of UK Economic Activity.” We consider some indicative ways for use in macroeconomic nowcasting. Even though the ONS confirms that the newly introduced big data‐based indicators are not constructed with forecasting purposes in mind, and applied researchers should be cautious when using them in this way, a simple out‐of‐sample nowcasting exercise reveals partial evidence that this dataset has some predictive power over GDP growth. Our results, which show a positive and encouraging first step towards the use of this type of data, suggest that national statistics agencies should allocate more resources in constructing big data‐based databases.